10 things to know about the EU Listing Act

The Listing Act is here – we take a look at key aspects for firms below.

Overview

The Listing Act is a package of measures consisting of the Listing Regulation; the Listing Directive; and the Multiple-vote Directive. It impacts investment firms and trading venues and will require changes and uplifts to existing policies and procedures and arrangements in some cases. For many investment firms, the most important aspect will be the regime concerning payment optionality for research.   The package amends several pieces of EU legislation including MIFID, MAR and MiFIR and will come into force 20 days following publication in the Official Journal of the EU, with changes to the MIFID Directive needing to be transposed within 18 months of the Directive coming into force. Certain aspects of the Listing Act Regulation have a 15-18 month transition.

Listing Act: Research

• Changes to the inducements regime include removing the market capitalisation threshold for companies in respect of which re-bundling of payments for trading execution and research is permitted and giving investment firms flexibility in relation to how best they wish to proceed when it comes to payments for research and execution services. Investment firms are instead required to inform clients as to the choice of payment method and to make their policy on payments for execution services and research available to clients (and, where relevant, information on managing conflicts of interest in respect of joint payment method for execution services and research). Investment firms would be required to annually assess the quality, usefulness and value of research and whether research contributes to better investment decisions. An agreement between the investment firm and the third-party provider of execution services and research will need to set out methodology for remuneration, including how the total cost of research is generally taken into account when establishing the total charges for investment services. ESMA has recently published a consultation paper in respect of amendments to MiFID Delegated Directive in light of the Listing Act. Proposed changes include that the methodology for remuneration should prevent the firm from paying considerably more than it would be paying if it was using another payment method. ESMA is to submit its final report to the Commission in Q2 2025.
• The Listing Act also provides that trading commentary and other bespoke trade advisory services linked to the execution of a transaction in financial instruments should not be considered as research.
• The UK has introduced a similar regime in relation to payment optionality for research. These rules have been in force since August 2024 (see our briefing here). The guardrails imposed for using the joint payment model in the UK are more extensive and prescriptive and may require more action from buy-side firms and sell-side firms e.g. in relation to the policy for joint payments; requirement for a methodology for how research costs are identified separately within total charges for joint payments; and the requirement for ante disclosures on costs and charges. The UK regime also provides that trading commentary and other bespoke trade advisory services linked to the execution of a transaction in financial instruments should not be considered research.

EU Code of Conduct on investment research

• The Listing Act package provides that research distributed will need to be fair, clear and not misleading. Research labelled as issuer sponsored research will only count as issuer sponsor research if it is produced in compliance with an EU Code of Conduct for issuer-sponsored research (ESMA is to develop RTS on EU Code of Conduct for issuer-sponsored research). Investment firms producing/distributing issuer sponsored research are required to have organisational arrangements in place to ensure that the research is produced in accordance with the EU Code of Conduct (Code of Conduct to set out standards concerning inter alia conflicts of interest and independence and objectivity). Research labelled issuer sponsored research will need to indicate clearly and prominently that it has been produced in accordance with EU Code of Conduct.
• The Listing Act is not the only package amending the EU MIFID inducements regime. Firms will need to prepare for changes to the costs and charges framework and other changes under the Retail Investment Strategy (see our briefings here and here). This has been proceeding along the EU legislative process since 2023, with the EU co legislators reaching a political agreement in April 2024.

Listing Act: Market Abuse

• The Listing Act extends the current regime permitting the delay of public disclosure of inside information by credit institutions/financial institutions order (to preserve the stability of the financial system) to the parent undertakings of these institutions.

• Other changes made by the Listing Act to MAR include: removal of the immediate disclosure requirement for intermediate steps in a protracted process; increasing the threshold for notification of PDMR transactions and widening exempted transactions under the regime; and confirming that the market sounding procedure under Article 11(6) is optional for disclosing market participants, with the result that a DMP observing the framework benefits from the safe harbour (non-compliance does not, however, automatically mean unlawful disclosure). DMPs will still need to assess whether the market sounding will involve the disclosure of inside information as required under Article 11(3)).
• The Listing Act amends MAR to introduce a market order data surveillance mechanism (starting initially in respect of shares but to be extended to futures and bonds) to be set up by NCAs in respect of trading venues with a significant cross border dimension. This is designed to allow for ongoing and timely exchange of order data collected from trading venues under Article 25 of MiFIR. A response to a request for data from the relevant trading venue must be responded to in a timely manner. Further details are to follow in due course: ESMA is to consult on the format for handing over information and relevant deadlines and a delegated act is to lay out further information in respect of "cross border dimension". Trading venues in scope will be required to have "appropriate arrangements, systems and procedures" to allow for the exchange of order data.
• Frontrunning in respect of inside information (which currently only applies to persons charged with the execution of orders concerning financial instruments) is expanded to cover other persons that might also be aware of a forthcoming order/transaction (e.g. where information is passed by virtue of management of a proprietary account or of a managed fund). This follows the ESMA's MAR Review report, which considered whether front-running conduct should expand to cover all persons involved in the pre-trade lifecycle, research analysts etc.

The MIFID regime is undergoing significant reform, both in the EU and in the UK. We have been profiling these changes and considering their impact on investment firms in a number of briefings, some of which are below:

• EU MIFIR Review: Next steps
• EU changes to the MIFID regime are here
• Retail Investments Strategy
• Post-trade risk reduction services and the DTO: FCA consultation paper
• FCA Relax Research Rules (through gritted teeth)
• FCA: Non-Equity Transparency Proposals
• Changes to UK MiFID confirmed: FCA Policy Statement (PS23/4)