18.III.2.4.3 Immediate versus deferred post-trade publication

Exceptions concerning post-trade transparency are deferral or suspension of post-trade publication. The deferral or suspension of post-trade transparency publication is of particular relevance for market participants taking temporary risk positions. A temporary risk position needs to be rebalanced afterwards, meaning that the acquired financial instruments need to be sold within a certain timeframe. When market participants know about a temporary risk position of another market participant, the former can use this information at the detriment of the one taking a temporary risk position. Such a temporary risk position becomes more acute in relation to large orders, since this implies the sale of more financial instruments.1

As demonstrated in the previous chapters, the protection of temporary risk positions has a longstanding tradition in EU regulation. The ISD already allowed RMs to delay or suspend post-trade publication where that proved to be justified by transactions that were ‘very large in scale’, ‘highly illiquid’, or ‘in the case of small markets, to preserve the anonymity of firms and investors’.2 The ISD possibilities for deferral and suspension were mainly the result of efforts from the market-led camp during the ISD negotiations. Whilst deferral was (and still is) important, also according the market-shaping philosophy,3 the countries with a market-led philosophy were in particular emphasizing position risks in case of immediate post-trade transparency. The market-led camp argued that with immediate post-trade transparency publication, liquidity would suffer where liquidity provision was mainly provided through quote-driven markets (i.e. market makers).4 A similar reasoning was reflected in the final text of the ISD.5

From the ISD to MiFID I deferral of post-trade publication was not contentious in abstracto within the EU. Main points of controversy between the market-led and market-shaping philosophy were the details, in particular the scope and length of deferral.6 The final position of the EU under MiFID I was that investment firms could delay post-trade publication where the transaction was (a) between an investment firm dealing on own account and a client of that firm; and (b) of a certain size. The permitted delay depended on the size of the transaction.7

MiFID II has both limited and expanded the possibilities for post-trade data publication. Under MiFID II the scope of post-trade publication deferral expanded. MiFID II has broadened the MiFID I possibility to delay equity post-trade transparency publication, since the transaction needs to be between an investment firm dealing on own account (other than through matched principal trading)8 and another counterparty.9 The latter reflects the view to ease post-trade publication deferral on RMs and MTFs, where trading is not by definition between an investment firm and a client (i.e. market-led philosophy).10 On the other hand, MiFID II reduces the deferral lengths of post-trade data publication. The reduction in deferral lengths makes MiFID II stricter compared to MiFID I. Compared to MiFID I less time is available in rebalancing a temporary risk position without post-trade transparency (i.e. market-shaping philosophy).11 The final MiFID II regime for equity post-trade transparency is in effect a mixture between market-led and market-shaping aspects.