European Union: Legislative Proposal On New European Insider Dealing And Market Manipulation (Market Abuse) Framework

Last Updated: 14 November 2011
Article by Christoph Moser and Ursula Rath
Most Read Contributor in Austria, September 2019

The legislative proposals by the European Commission of 20 October 2011 aim to replace and to extend the existing legal framework based on the Market Abuse Directive 2003/6/EC and to adapt it to market developments since 2003. Notably, the market abuse regime shall be extended to cover financial instruments traded on multilateral trading facilities (MTFs) and other new types of organized trading facilities (OTFs) in at least one Member State as well as financial instruments traded over-the-counter (OTC). EU emission allowances will come within the scope of the market abuse regime for the first time. Further measures shall particularly include criminal sanctions for market abuse in all European jurisdictions.

On 25 October 2011, the European Commission adopted (i) a proposal for a regulation of the European Parliament and of the Council on insider dealing and market manipulation (market abuse) (the "Market Abuse Regulation"; "MAR") and (ii) a proposal for a directive of the European Parliament and of the Council on criminal sanctions for insider dealing and market manipulation (the "Market Abuse Directive 2"; "MAD2"). The proposals are the result of a process initiated in 2008 in a conference on the review of the European market abuse law regime, followed by a call for evidence on the review of the Market Abuse Directive in 2009 and a public consultation process in July 2010.

The Commission proposals have now been passed to the European Parliament and the Council for negotiation and adoption. Once adopted, Member States of the European Union will have two years to implement MAD2 into their national laws whereas MAR would apply directly from 24 months after its entry into force.

Market Abuse Regulation

By introducing a harmonized set of core rules with the directly applicable MAR, the Commission aims to reduce regulatory complexity and enhance legal certainty. Selected issues imposed by the MAR relate to the following:

  • Scope of application extended

In contrast to the Market Abuse Directive, which is based on the concept of prohibiting insider dealing or market manipulation in financial instruments admitted to trading on a regulated market, the scope of application of the European market abuse laws will be significantly extended by MAR. Financial instruments admitted to trading on a multilateral trading facility (MTF) or on the new category of organized trading facilities (OTFs) only will now be covered by European legislation as will be financial instruments traded over-the-counter (OTC). In particular, market manipulation by derivates traded OTC (e.g. Credit-Default-Swaps (CDS)) shall be prohibited as OTC derivatives can affect the covered underlying market.

In addition, MAR aims to improve protection against market abuse through commodity derivatives. Transactions only relating to commodity spot markets do not fall under the scope of MAR. However, MAR extends the scope of market manipulation to cover transactions in spot commodity contracts or behaviors on commodity spot markets which are related to and have an effect on financial and derivative markets. Further, the proposal clarifies that market abuse occurring across both commodity and related derivative markets is prohibited.

Emission allowances will be reclassified as financial instruments as part of the review of MiFID. Accordingly, they will also fall under the scope of the market abuse framework. Participants in the emission allowance market will be obliged to disclose inside information on emission allowances as they hold the relevant information suitable for ad hoc and periodic disclosure rather than the respective issuers of emission allowances.

  • Market manipulation by algorithmic and high frequency trading

In light of increasing automated trading systems based on algorithmic or high frequency trading mechanisms, the Commission proposal of MAR includes a reference to certain prohibited automated trading strategies, e.g. quote stuffing, layering and spoofing. Whereas most automated trading strategies are still legitimate, Article 8 para 3 lit c MAR contains a non-exhaustive list of market manipulation techniques related to abusive algorithm based behaviors.

  • Attempted market manipulation

Attempts of market manipulation shall be prohibited because market manipulation may occur even though an order was not placed or a transaction was not executed. This will enable authorities to impose sanctions when someone unsuccessfully attempts market manipulation.

  • Abuse of inside information vs. ad hoc disclosure

According to MAR, inside information can be abused even before an issuer is under the obligation to disclose such information ad hoc to the public because it is not sufficiently precise. In such cases, the prohibition against insider dealing should apply, but the obligation on the issuer to disclose the information should not. By way of example the state of contract negotiations, terms provisionally agreed in contract negotiations, the possibility of a placement of financial instruments, conditions under which financial instruments will be marketed, or provisional terms for the placement of financial instruments may be relevant information for investors and may therefore constitute inside information.

  • Increased power of authorities

Administrative authorities will be entitled to access private premises and seize documents after having obtained prior authorization from the judicial authority of the respective Member State concerned in accordance with national law, if reasonable suspicion exists that such may be relevant to prove a case of insider dealing or market manipulation.

  • Uniform minimum sanctions

As pecuniary sanctions for market abuse vary significantly among Member States, MAR promotes convergence of sanctions and defines minimum rules for administrative measures, sanctions and fines. This does, however, not limit Member states to impose stricter rules. Such minimum sanctions include inter alia administrative pecuniary sanctions of up to twice the amount of the profits gained or losses avoided by market abuse as well as of up to EUR 5 million for natural persons and up to 10% of a legal person's total annual turnover in the preceding business year. Further, Member States may impose 'public shaming' sanctions, that is public statements published on the competent authorities' website, indicating the person responsible and the offence committed.

  • Protection and incentives for whistleblowers

Whistleblowers bring new information to the attention of competent authorities but may be deterred for fear of retaliation, or for lack of incentives.

Accordingly, MAR aims to ensure that adequate arrangements are in place to encourage whistleblowers to file reports to competent authorities, to protect them from retaliation or to provide financial incentives for whistle blowing. Whistleblowers should only be eligible for those incentives where they bring to light new information which they are not already legally obliged to notify and where this information results in a sanction.

  • Directors' dealings

As regards directors' dealings the proposal of MAR clarifies that the pledging or lending of financial instruments and also transactions by another person exercising discretion for the director shall fall under the directors' dealings reporting obligation. However, in order to ensure an appropriate balance between the level of transparency and the number of directors' dealing reports, a uniform threshold of EUR 20,000 per annum will be introduced below which transactions shall not be reported.

Market Abuse Directive 2

Not all Member States have to date provided for criminal sanctions for serious breaches of national legislation implementing the Market Abuse Directive. In the opinion of the Commission criminal sanctions for market manipulation are essential in all Member States. As a consequence, the proposal of MAD2 foresees that intentional insider dealing and market manipulation should be regarded as criminal offences by Member States and therefore be subject to criminal sanctions. Likewise, inciting, aiding as well as abetting such criminal offences or attempting them shall also be punishable by Member States.


We expect MAR and MAD2 to have overall positive effects on the efficiency and transparency of capital markets in Austria. While Austrian law does already meet several provisions imposed by the MAR and MAD2 legislative framework, certain clarifications (e.g. that inside information can be abused before an issuer is under the obligation to publicly disclose it) are welcome.

The amended definition of market manipulation fortunately now covers all types of behavior that may give false or misleading signals or secure prices at artificial levels or that employ fictitious devices, deceptions or contrivances - and not only transactions or trading orders.

While the prohibition of market manipulation attempts as well as substantially increased administrative fines may help reducing insider dealings and market manipulation (attempts) in practice, it remains to be seen whether the proposed incentives for whistleblowers, in particular as regards financial incentives, are indeed adequate to support detection of market abuse.

Also, the proposed increase in scope of the market abuse regime will significantly extend EU rules to cover financial instruments listed or traded on markets outside the EU which are either also traded on an EU regulated market, MTF or OTF or related to a financial instrument traded on the former.


MAR (provisional proposal):

MAD2 (provisional proposal):

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions