The Committee of European Securities Regulators (CESR) said that it has encountered varying interpretations of whether structured products should be classified as complex or non-complex in the context of MiFID, depending on the structure of the investment.


In other words,there is a need for greater clarity, CESR said.


The European regulator said it plans to publish a consultation paper on complex/non complex financial instruments for the purpose of Articles 19(5) and (6) of Directive 2004/39/EC with a view to produce a definitive Q&A document in 3Q09.


CESR said it was also committed to further work to clarify the application of the MiFID suitability regime, considering the potential difficulty in determining the dividing line between advised and non-advised sales.


As part of this work, the CESR MiFID Level 3 expert group will consider case studies and the degree to which an adviser can rely on the credit-rating of an issuer or instrument when making an assessment of suitability. The final Level 3 product should be published no earlier than 4Q09, and there will be a previous public consultation.


The group also said that exchanges, clearing houses and other market participants will need to address challenges in order to ensure that markets continue to operate efficiently during times of stress.


Relevant issues include the handling of unsettled transactions and the establishment of a central counterparty for standard, liquid CDS products such as indices.

“CESR notes that communication prior to and during default events could be improved, as showed in the experience of Eurex Clearing,” regulators said. “CESR notes that minor improvements could be made regarding the risk run by a market member when they introduce orders on behalf of their client without any collateral, as the experience of Iberclear has shown.”

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