Market infrastructures refer to the systems, structures, and procedures that facilitate the trading, clearing, and settlement of financial instruments. Blockchain technology, on the other hand, is a distributed ledger technology that allows for the secure and transparent recording of transactions.
The use of blockchain technology in market infrastructures is gaining increasing attention as it can
potentially increase efficiency, reduce costs, and improve transparency and security. Blockchain technology can be used in various aspects of market infrastructures, including the issuance and trading of securities, clearing and settlement of trades, and post-trade processing.
The European Pilot Regime regulation is a framework developed by the European Commission to support the testing of innovative financial products and services, including those based on blockchain technology. The pilot regime provides a regulatory sandbox environment for companies to test and develop new financial products and services under certain regulatory exemptions.
The pilot regime aims to support innovation while ensuring consumer protection and financial stability. Companies that participate in the pilot regime will be subject to certain conditions and requirements, including reporting obligations and risk management measures.
Overall, the European Pilot Regime regulation is a significant step towards fostering the development and adoption of blockchain-based market infrastructures in Europe.
AMF: Market infrastructures on blockchain: Application of the EU DLT Pilot Regime from March 23rd
The application date of the European regulation on a pilot regime for market infrastructures based on distributed ledger technology is soon approaching. The AMF would like to provide certain useful information reminders around this, and stands ready to engage with interested parties and prospective applicants.
ESMA recent publications
Following a Call for evidence published last year seeking feedback from stakeholders on the
application of the EU’s financial legislation for DLT market infrastructures, the European Securities and Markets Authority (ESMA) issued a Report on the DLT Pilot Regime and compensatory measures on supervisory data in September 2022. It concluded that modifying the MiFIR regulatory technical standards on transparency and data reporting was not necessary. However, ESMA published some Q&As to provide clarification on the practical implementation of the Pilot Regime. This Q&A document may evolve in the future to cater for new questions.
In its report, ESMA also makes recommendations in relation to compensatory measures that national competent authorities should request to ensure the integrity, completeness, consistency, usability and comparability of the supervisory data collected from DLT market infrastructures.
The AMF also wishes to remind potential applicants that ESMA published a “Final report on guidelines on standard forms, formats and templates to apply for permission to operate a DLT Market infrastructure” in December 2022. These guidelines contain such forms, formats and templates to be used by interested applicants who wish to submit an application, be they new entities or already established ones, as well as for those wishing to request exemptions under the applicable
MiFID2/MiFIR and CSDR requirements.
The AMF highly recommends that potential applicants take the English-version guidelines into
consideration, whilst awaiting for official translations into European Union languages to be finalised, and reach out to the AMF should they wish to commence discussions on the Pilot regime.
The AMF also wishes to provide a reminder that any information relating to an authorisation request to operate a DLT market infrastructure, or any exemption request in relation to the EU DLT Pilot Regime must be submitted on a durable medium. The AMF further recommends that such information be submitted electronically and preferably in English.
Current stages of adapting the French national legal framework
The French Parliament is currently discussing a draft bill to amend France’s domestic legislation (“projet de loi portant diverses dispositions d’adaptation au droit de l’Union européenne dans les
domaines de l’économie, de la santé, du travail, des transports et de l’agriculture“) in order to align it with the European Pilot Regime framework. It will also clarify the role of the French national
competent authorities for the purposes of the application of the Pilot regime.
Further, following recommendations made by the Haut Comité Juridique de Place (HCJP) published on 20 May 2022 on the review of digital securities (English version unavailable), France’s legal framework for DLT-registered securities is currently being adapted to fully cater to the needs of
French DLT market infrastructures, and to make it more attractive for issuers of DLT financial instruments.
Two categories of securities in French law will constitute financial instruments admitted to trading
on a DLT market infrastructure for the purposes of the Pilot regime regulation: securities that are registered within a DLT pursuant to Order n° 2017-1674 (the so-called “Blockchain Order”), and bearer
securities registered within a DLT according to the provisions of the Pilot regime regulation.
Finally, the draft bill currently being discussed will organise the attribution of roles among authorities at the French level – the Banque de France, the Autorité de contrôle prudentiel et de résolution (ACPR) and the AMF – concerning the three different types of regulated entities that can request the specific
authorisations and exemptions under the Pilot Regime. The AMF will be the entry point for regulated markets (that seek to operate a DLT MTF) and central security depositaries, and the ACPR for investment firms.