The Concept of Financial Instruments: Drawing the Borderline between MiFID and MiCAR

Matthias Lehmann; Fabian Schinerl

doi:10.1093/cmlj/kmae017

Titel

The Concept of Financial Instruments: Drawing the Borderline between MiFID and MiCAR

Autor*in

Matthias Lehmann

Institut für Europarecht, Internationales Recht und Rechtsvergleichung, Rechtswissenschaftliche Fakultät, Universität Wien

Fabian Schinerl

Institut für Europarecht, Internationales Recht und Rechtsvergleichung, Rechtswissenschaftliche Fakultät, Universität Wien

Abstract

The notion of a ‘financial instrument’ defines the frontier of traditional financial law, such as the Markets in Financial Instruments Directive (MiFID II), and the more recent crypto regulation, epitomized by the Markets in Crypto-Assets Regulation (MiCAR). The characteristics of a ‘financial instrument’ cannot be defined statically by way of a checklist. Instead, the definition must be open to future products and developments in the market, which at the moment cannot be foreseen. That is why we suggest a ‘flexible definition’. This definition is composed of typical elements that must not necessarily be present all the time. Rather, the lack of one element may be compensated by the abundance of another. Thanks to the flexible definition, it is possible to achieve both a necessary degree of legal certainty for market participants and sufficient space for supervisory authorities to respond to future developments. The typical elements of financial instruments can be found through a study of EU financial regulation and an analysis of the underlying economic reality. We also draw comparisons to US law that regulates similar problems. Three elements are typically present in financial instruments: (1) they create rights and obligations, (2) they are tradable on markets and (3) they have an investment function. (1) That financial instruments typically create rights and obligations is due to their contractual nature. These rights and obligations must be functionally similar to those arising from products detailed in Annex I Section C of MiFID II. (2) Tradability requires transferability, negotiability, and fungibility. It is best viewed as a spectrum rather than a definitive boundary. (3) The purpose of financial instruments is to generate future financial returns or protect against financial risks. They are not empty shells but serve as legal channels for investment. The investment function must be assessed by taking an ex ante view, based on the endogenous characteristics of a product, the issuer’s intentions and market communications, and the expectations of the public they are likely to generate.

Objekt-Typ

journal article

Sprache

Englisch [eng]

Persistent identifier

phaidra.univie.ac.at/o:2126912

DOI

10.1093/cmlj/kmae017

Erschienen in

Titel

Capital Markets Law Journal

Band