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At long last, the Markets in Financial Instruments Directive reform package (Mifid II) has been announced. But the final accord, aimed at overhauling Europe's securities markets, has proved more than a little underwhelming.

The number of Asian takeovers of large North American targets throughout 2013 tested the commercial and regulatory boundaries of inbound M&A. It also set some precedents for how authorities will react in these scenarios. This should allow new purchasers – worldwide, but especially from the east – to prepare for regulatory concerns.

The release of the final Volcker rule late last year was met with a sigh of relief by the financial sector.

Thomas Cartwright,

New investment vehicles and listing possibilities could help revive India’s primary markets in 2014

Regulators have taken steps to clarify the enforceability of put and call options in India. But there are outstanding issues to be addressed

Anna Pinedo Market participants are still poring through the final regulations under section 619 of the Dodd-Frank Act, known as the Volcker Rule. The Volcker Rule prohibits a banking entity from engaging in proprietary trading, and from acquiring or retaining an ownership interest in, or sponsoring, a hedge fund or private equity fund. Given the breadth of the activities covered by the Volcker Rule, most financial institutions will be affected. Proprietary trading is defined as engaging as principal for the trading account of the banking entity in the purchase or sale of a financial instrument. Trades are presumed to be for the trading account of a banking entity if the position is held for fewer than sixty days, unless the banking entity can demonstrate otherwise. Certain trading activity is expressly permitted, such as in connection with underwriting activities, market making-related activities, and risk-mitigating hedging activities. However, the conditions for reliance on these exclusions are complex. In order to engage in a permitted activity, a banking entity must maintain an internal compliance programme; the compensation arrangements of personnel involved in the activity must not be designed to reward or to create incentives to engage in prohibited proprietary trading; and the banking entity must be licensed or registered to engage in the permitted activity. Trading in connection with underwriting activities is permitted only if the trading desk's underwriting position is related to a distribution of securities for which the banking entity is acting as underwriter. The prohibition on proprietary trading does not apply to purchases or sales of financial instruments by a banking entity made in connection with that entity's market making-related activities. Subject to numerous conditions, hedging activities that are 'in connection with and related to individual or aggregated positions, contracts or other holdings' and 'designed to reduce the specific risks to the banking entity' that are 'related to such positions, contracts or other holdings' are permitted. In order to distinguish between these permitted activities and impermissible proprietary trading, the rule requires banking entities to establish comprehensive compliance policies, procedures, and rigorous calculations and documentation. Certain activities that occur solely outside of the US are excluded from the scope of the rule. Although it is still too early to assess the full impact of the rule on capital markets activities in the US, it is fair to assume that certain foreign banking entities with limited operations in the country may determine to restructure their US business and pare back the scope of their activities. For US banking entities, it is reasonable to anticipate that more business may be conducted on an agency or riskless principal basis, and that market making in certain more illiquid securities may be negatively affected. Given that non-bank broker-dealers are not subject to the rule, certain activities may shift to these entities. Over time, the effects are likely to be more far-reaching than these observations suggest.

Dinesh Eedi Karan Talwar There has been lot of uncertainty on the enforceability of exit options in shareholders' agreements (SHAs) of public limited companies (PLCs), especially those listed in India. Conflicting decisions of various High Courts regarding restrictions on the free transferability of securities, orders of the Securities and Exchange Board of India (Sebi) on the legality of put and call options and the intransigence of the government on the same issue created havoc and confusion among the investor community. In an attempt to enhance its business image and clear all ambiguities, sections 5 and 58 of the Companies Act 2013 provide clarity on the validity and enforceability of such provisions in the SHA and Articles of Association (AoAs) of PLCs. The provisions, however, have not yet come into force. Section 5 envisages provisions in the AoA which can only be altered with conditions or procedures that are even stricter than those required for special resolution. Section 58(2) provides that, as a general rule, securities of PLCs shall be freely transferable, but any contract or arrangement for the transfer of securities between two parties shall be enforceable as a contract, implying that contracted restrictions on the transfer of securities (such as right of first refusal, and drag- and tag-along rights) are valid even if they are not specifically spelt out in the AoA.

MiFID 2. That it sounds like the latest Hollywood blockbuster is apt. For, the long-awaited second installment of Europe's Markets in Financial Instruments Directive will have dramatic consequences for the region's securities market.

A lack of certainty about India's investment environment is a long-standing and near-universal complaint. While the Securities and Exchange Board of India (Sebi) and Reserve Bank of India (RBI) seem to recognise this problem, their actions are missing the point – more rules aren't helping.