4.II.2.3.2 Background

Already under the ISD a number of European trading platforms used the type of orders used in order management systems, in particular iceberg orders.1 CESR recognized the merits of iceberg orders in advising on the MiFID I Level 2 measures. CESR advised the Commission that if trading on an RM or MTF was conducted by means of an iceberg order, whereby the proportion of the order available for execution was visible, pre-trade transparency obligations were considered to have been met.2 In CESR’s view the MiFID I pre-trade transparency obligation needed to be exempted (waived) for iceberg orders. CESR stated that the order management facilities enabling iceberg orders helped investment firms and their clients in executing orders in the most efficient way.3

The respondents to the CESR consultation widely supported the proposed waiver for iceberg orders. However, respondents were worried about similar order types that they considered qualified for a waiver.4 In a reaction, CESR decided to change its approach. CESR noted that certain facilities provided by RMs and MTFs ‘for the management of orders generally’ could be exempted from the pre-trade transparency obligations.5 CESR added that the provision of order management facilities needed to be left to the discretion of RMs and MTFs.6

The Commission adopted CESR’s advice. This is apparent in the final MiFID I text. MiFID I covered an order management facility waiver for RMs and MTFs. All order types were permitted for the waiver, as long as the orders were disclosed upon a triggering event (i.e. completely dark orders were not eligible).7 The order management facility waiver of MiFID I was broadly drafted. This reflected CESR’s view of leaving discretion to RMs and MTFs in designing their order management facilities.