5.V.3 Concluding remarks

MiFID II covers a share trading-obligation. Save for exceptions, investment firms are required to undertake trades in shares on pre-trade transparent platforms, namely on an RM, MTF, SI or equivalent third-country trading venue. The aim of the MiFID II share trading obligation is to reduce the amount of trading that took place in particular outside RMs and MTFs under MiFID I (there were only a limited amount of SIs under MiFID I). The MiFID II share trading-obligation is an element of the broader MiFID II goal to move trading to regulated venues, the latter being subject to, among other things, a set of equity pre-trade transparency rules.

The approach of MiFID II is hybrid when it comes to the share trading-obligation. It has both top-down and bottom-up elements. One top-down element is that the share trading-obligation is mandatory for all Member States. Second, the MiFID II share trading-obligation rule has a broad scope, in particular in relation to third countries. Third, the exceptions to the share trading obligation are limited. These elements are all top-down and make the MiFID II share trading-obligation quite strict. That being said, there are also bottom-up elements. The obligation does not apply to other equity instruments, such as depositary receipts, ETFs, and certificates. Neither does MiFID II define all terms and exceptions, which makes several elements of the MiFID II share trading-provision unclear in nature. ESMA and the Commission have provided formally non-binding guidance to ensure sufficient clarity on the share trading-obligation.

As will be shown in section VII (MiFID II Review), the MiFID II share trading-obligation is an important part of the review of the MiFID II equity pre-trade (and post-trade) transparency regime. Experience with MiFID II so far indicates that share trading has in particular moved to SIs. SIs have captured a significant portion of the market, with estimates as high as 34 percent.1 The increase in SIs might be driven by means to circumvent the more onerous pre-trade transparency rules for RMs and MTFs (in particular the double volume cap). For this reason, ESMA carefully assesses whether SIs can remain an eligible venue for the MiFID II share trading-obligation. Another point of care concerns third country issues. There are many uncertainties as to which third country situations result in an applicability of the MiFID II share trading-obligation. For this reason, the MiFID II share trading-obligation is part of the MiFID II Review.