9.V MiFID II review

MiFID II requires the Commission, after consulting ESMA, to submit a report to the European Parliament and to the Council on the impact of the MiFID II equity post-trade transparency regime.1 At the point of writing, the Commission issued a consultation paper on the matter.2 The final Commission Review is not yet available. ESMA has published a consultation paper and final review report on the MiFID II equity pre-trade (and post-trade) transparency requirements.3 The Commission consultation paper is at an early stage in terms of recommendations for the MiFID II equity post-trade transparency regime. By contrast, ESMA provides detailed observations and proposals. For this reason, the paragraph emphasizes the ESMA MiFID II Review. The ESMA MiFID II Review includes the consultation and the final ESMA report.4 Some respondents considered the review to be very early in the particular context of both Brexit and COVID-19.5 Whatever the case may be, the ESMA MiFID II Review provides indications for the future direction of the MiFID II equity post-trade transparency regime. The ESMA MiFID II Review – and, where relevant, the Commission’s assessment – are for this reason examined in this section below.

Before doing so, it is useful to note that MiFID II requires the reviews of ESMA and the Commission to emphasize the equity pre-trade transparency regime, in particular the double volume cap.6 The result is a relatively small ESMA MiFID II Review on the MiFID II equity post-trade transparency regime. The Commission’s consultation is even more concise.7 The ESMA MiFID II Review addresses five elements of the MiFID II equity post-trade transparency regime, namely: (1) the equity post-trade transparency regime for RMs and MTFs; (2) the equity post-trade transparency regime for investment firms operating outside RMs and MTFs (including, but not only, SIs); (3) the real-time publication requirement; (4) equity post-trade transparency calculations and databases (in particular FITRS); and (5) post-trade transparency requirements applicable to third country transactions.

Compared to the MiFID II equity pre-trade transparency regime, ESMA is relatively satisfied with the MiFID II equity post-trade transparency regime. That being said, concerns remain. A main concern of ESMA is that under the current MiFID II regime it is too easy to obtain deferral of post-trade data publication for ETFs (ESMA is satisfied with deferral for shares and depositary receipts).8 In addition, ESMA is worried that the equity post-trade transparency regime for investment firms operating outside RMs and MTFs does not result in appropriate reporting and flagging of transactions not subject to the MiFID II share trading-obligation.9 ESMA makes two main recommendations to change the situation. ESMA recommends (i) to increase the post-trade large in scale threshold for ETFs (i.e. stricter MiFID II provisions in obtaining deferral for ETFs) and (ii) to report and flag transactions that are not subject to the MiFID II share trading-obligation, but subject to post-trade transparency requirements to FITRS (i.e. enhance transparency about trades that are not subject to the MiFID II share trading-obligation).10 The MiFID II Review, including ESMA’s recommendations, are examined below.