Author: Karen Cooper

ESMA seeks views on pre-hedging… and indicates thinking on pre-hedging in RFQ scenarios

ESMA’s call for evidence (“CFE”) on pre-hedging explores a potential definition of pre-hedging and considers, in particular, the EU MAR and EU MiFID II implications of pre-hedging in RFQ scenarios. ESMA comments on potential indicators of pre-hedging activity being either illegal behaviour (front running) or indicative of legitimate behaviour. This includes comments around the need for inventory risk management, the instruments used for the pre-hedge, and whether the client has given prior consent to pre-hedging activity.