This consultation is the first step in the process of translating the Mifid II requirements into practically applicable regulations. Mifid II contains over 100 requirements for which Esma must draft regulatory technical standards (RTS) and implementing technical standards (ITS), and provide technical advice to the European Commission to allow it to adopt delegated acts.

The main issues addressed in the discussion and consultation paper are the structure, transparency and regulation of financial markets, and strengthening investor protection.

Steven Maijoor, Esma chair described the changes that Mifid II would enact as “the biggest overhaul of financial markets regulation in the EU for a decade” and “key to restoring trust in our financial markets”.

He called for input from market participants: “We appreciate the magnitude of this exercise for stakeholders. We strongly encourage all those affected by these reforms to provide their views to ensure that we take them into account in our final proposals.”

Esma will hold three public hearings about the issues around secondary markets, investor protection and commodity derivatives on July 7 and 8. The closing date for responses to both papers is August 1.

Esma will publish the Consultation Paper on Mifid II Technical Advice to be delivered to the European Commission by December 2014 and the Discussion Paper on Mifid II draft RTS/ITS, which will provide the basis for a further consultation paper on the draft of the RTS and ITS which is expected to be issued in late 2014 or early next year.

“The reform of Mifid is an integral part of the EU’s strategy to address the effects of the financial crisis and aims to bring greater transparency to markets and to strengthen investor protection,” said Majoor.

Protection of retail investor requirements will include limiting the use of commissions, creating conditions for the provision of independent investment advice and product intervention powers.

Transparency requirements for a broader range of asset classes will include the obligation to trade derivatives on-exchange, requirements on algorithmic and high-frequency-trading and new supervisory tools for commodity derivatives.

The draft regulatory technical standards in regards to investor protection relate to the authorisation of investment firms, passporting, and certain best execution obligations.