Europe’s Securities Watchdog Seeks Feedback on Regulations Ahead of DLT Pilot

ESMA, the European Securities and Markets Authority, has set out to establish if EU authorities need to amend existing regulations in order to facilitate the trading and settlement of tokenized securities. The regulator is now seeking opinions on the matter ahead of launching a pilot regime for market infrastructures based on distributed ledger technology (DLT).

The European securities watchdog ESMA is accepting public comments on the potential update of regulations concerning the implementation of DLT solutions in the market. The authority has to assess whether some regulatory technical standards (RTS) developed under the Markets in Financial Instruments Regulation (MIFIR) need to be amended in order to be applied to securities issued, traded, and recorded on DLT.

The standards in question pertain to trade transparency and data reporting requirements, ESMA notes in a “Call for Evidence” document published this week, which seeks feedback from various stakeholders. These include trading venues, securities settlement systems and entities planning to operate under its DLT pilot regime, and other market participants that intend to use DLT market infrastructures.

The announcement notes that the text of the DLT pilot is not finalized yet but as an agreement between the European Parliament and the European Council has already been reached in November, ESMA believes it’s necessary to begin consultations now. The regulator explains:

The DLT Pilot Regime is likely to start applying in the beginning of 2023, which leaves only little time for the assessment and potential amendments of the RTS.

The Paris-based regulatory body will accept and review the comments submitted by interested parties by March 4, 2022. Based on the feedback provided by the market participants, the authority will consider introducing specific amendments to the RTS.

If such changes are deemed necessary, the European Securities and Markets Authority will once again seek public opinion on its proposals through a consultation paper to be issued before the final draft of the RTS is presented to the European Commission. The executive power in Brussels will have the final say on their adoption.

Do you expect the EU to amend its regulations for the DLT pilot regime for securities trading and settlement? Tell us in the comments section below.