The European Securities and Markets Authority (ESMA) released long-awaited details of its capital market reforms this week. Known as MiFID II, the Markets in Financial Instruments Directive is the latest installment in the raft of regulations that have followed the 2008 financial crisis. Here are the top three things in-house lawyers should look out for:

1) Commodity traders are in the firing line

ESMA is targeting companies that use commodity derivatives to hedge price fluctuations. From January 2017, agriculture, metals and energy companies will have to set aside ten per cent of total trading exposure as a capital buffer, to put them on a level playing field with financial institutions currently restricted from speculating heavily on commodity markets.

Farmers, forgers, miners and those that buy goods from them will be among the firms subject to tightened capital controls, designed to discourage gambling on commodity prices by corporates. 

'Once you go into speculative trading you are competing with investment banks and there should be a level playing field, you will be caught by the rules,' ESMA chairman Steven Maijoor told a conference call. 

2) Bonds are to be treated more like shares 

The MiFID II rules will make bond trading a lot more complicated. At the moment, trading services providers must publish the bid and offer prices of shares, but not bonds. 'There were genuine concerns about misclassification risk for individual bonds under a category-based approach,' said Damian Carolan, a lawyer at Allen & Overy told Reuters. Under the new regulations, 2,000 bonds that frequently change ownership in the EU will be subject to greater transparency, with bid and offer data to be published.

3) Dark pools: tough rules 

The use of anonymous trading rooms that allow vast transactions to take place in secret in order to prevent price moves is to be restricted. Dark pools will be banned from trading an equity for six months if eight per cent of the company's shares have been traded in that same venue over the previous year. City AM reports that any dark pool handling over four per cent of a firm's shares in any given year will be restricted from trading.

Sources: Reuters, City AM