EU Equity pre- and post-trade transparency regulation (LBF vol. 21) 2021/9.IV.2.2.7.1:9.IV.2.2.7.1 Level 1 and Level 2 text: main reasons why MiFID II is more extensive than MiFID I

EU Equity pre- and post-trade transparency regulation (LBF vol. 21) 2021/9.IV.2.2.7.1

9.IV.2.2.7.1 Level 1 and Level 2 text: main reasons why MiFID II is more extensive than MiFID I

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To understand the MiFID II framework for calculations and estimates, including the related data collection, it is useful to look at the situation under MiFID I. As examined in chapter 8, MiFID I was the first EU regime to introduce harmonised calculation and estimation provisions for equity post-trade transparency purposes. CESR supplemented the MiFID I text, in particular with regard to data collection.1 The aim of the MiFID I text and CESR guidance was to ensure a consistent approach across the EU, as well as supporting the MiFID I equity post-trade transparency regime to function in practice. MiFID II reflects a similar spirit, but is more extensive compared to MiFID I. There are three main reasons why this is the case:

1.

The first reason is a practical one, namely because MiFID II can. The EU (in particular CESR) already wanted to collect data from a broad range of venues. However, at the time there was only a limited amount of readily accessible data available for calculating some of the transparency thresholds set out for MiFID I.2 As a result, MiFID I was less extensive compared to MiFID II (the latter providing a regulatory framework for RMs, MTFs and APAs and CTPs).

2.

Data collection problems arose under MiFID I. Initially, MiFID I relied on transaction reports (post-trade reports to the NCA) to ensure the collection of data. The transaction reports resulted in technical problems in performing the calculations and estimates.3 CESR provided guidance to solve the situation, among other things, by recommending post-trade data (available under the MiFID I post-trade transparency regime) to be reported to NCAs. MiFID II reflects the aim to prevent such issues from happening again through providing more harmonisation in the area of data collection for the MiFID II calculations and estimates. MiFID II does not rely on transaction reports for the data collection, but instead – reflecting the CESR guidance under MiFID I – introduces specific provisions for the data collection (see paragraphs 2.2.1-5 above).

3.

Finally, the MiFID II equity post-trade transparency regime requires more calculations and estimates compared to MiFID I. The MiFID II equity post-trade transparency regime is broader in scope. The scope includes not only shares, but also depositary receipts (ETFs: although the average daily turnover is not calculated for ETFs), certificates, and other similar financial instruments (MiFID I was confined to shares only).4 Compared to the MiFID II equity pre-trade transparency regime, the regime is less burdensome, because the MiFID II equity post-trade transparency regime covers less thresholds (i.e. only deferral).

The foregoing three factors are apparent in the MiFID II text. MiFID II covers harmonised provisions specifically designed for the data collection necessary for the equity post-trade transparency calculations. Detailed provisions are in place to ensure the calculation and estimates are performed in a uniform and consistent way across the EU, not only for shares, but also for depositary receipts, certificates, and other similar financial instruments (not: ETFs).5

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