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Published on: 22. August 2023

ESMA European Securitas and Market Authority, similar to SEC (US).

ESMA stands for the European Securities and Markets Authority. It is an independent European Union (EU) regulatory agency responsible for ensuring the stability, integrity, transparency, and functioning of the financial markets within the EU. ESMA was established in 2011 as part of the EU’s response to the global financial crisis to enhance financial market supervision and coordination.

Key functions and responsibilities of ESMA include:

Regulation and Oversight: ESMA plays a key role in the regulation and oversight of financial markets in the EU. It develops technical standards, guidelines, and recommendations to ensure consistent and harmonized regulatory practices across member states.

Supervision: While ESMA does not directly supervise individual financial market participants, it works closely with national competent authorities (NCAs) to coordinate and oversee their supervision. ESMA helps ensure that NCAs apply EU rules consistently and effectively.

Investor Protection: ESMA is involved in promoting investor protection by establishing rules and guidelines for financial products and services, ensuring transparency, and enhancing investor information.

Market Integrity: ESMA monitors and assesses market developments to identify risks to market integrity and stability. It takes action to prevent and address market abuse, insider trading, and other misconduct.

Market Data and Transparency: ESMA collects and analyses market data to enhance transparency, provide insights into market trends, and support regulatory decision-making.

Supervisory Convergence: ESMA facilitates convergence among the regulatory practices of member states’ NCAs. This convergence ensures consistent application of EU regulations across different jurisdictions.

Stress Testing and Risk Assessment: ESMA conducts stress tests and risk assessments to identify vulnerabilities in the EU financial markets and assess potential systemic risks.

Regulatory Technical Standards: ESMA develops regulatory technical standards (RTS) and implementing technical standards (ITS) that provide detailed specifications for the implementation of EU financial regulations.

Supervisory Coordination: ESMA coordinates the supervision of certain entities that operate across multiple EU member states, such as credit rating agencies and trade repositories.

ESMA operates in close collaboration with other EU institutions, including the European Central Bank (ECB), the European Banking Authority (EBA), and the European Insurance and Occupational Pensions Authority (EIOPA). It contributes to the development of a single rulebook for financial markets across the EU, promoting investor protection, market integrity, and financial stability.

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