8.III.1.6.3 Difference 1: exceptions to the equity post-trade transparency obligations

A difference between the MiFID I post-trade transparency obligations for investment firms and RMs/MTFs was the exception designed specifically for investment firms. As noted, the MiFID I Directive required the Commission to clarify the application of the post-trade transparency obligations in relation to transactions involving the use of shares for collateral, lending or other purposes where the exchange of shares was determined by factors other than the current market price.1 CESR advised the Commission in this context.

CESR noted that for certain types of transactions post-trade information is of little utility to the public. In some circumstances such information could even send misleading signals as to the real trading conditions in the market.2 Therefore, it was proposed to exempt certain transactions from the post-trade obligation. CESR noted such transactions were, for example, using shares as collateral or stock lending.3 CESR provided the general advice that, in case of transactions (1) made outside the RM or MTF that were (2) subject to other conditions than the current market price of the share, post-trade information only needed to be published if the transaction entailed information that was significant for the efficient price formation of the share in question.4

The Commission specified CESR’s advice through a general exception for several MiFID I rules, including on post-trade transparency. This position is also evident in the final MiFID I text. The MiFID I Implementing Regulation notes that the purchase and sale of a financial instrument, that is – a ‘transaction’, does not include: (a) securities financing transactions; (b) the exercise of options or of covered warrants; and (c) primary market transactions, such as issuance, allotment or subscription.5

The aim here was to find a balance. On the one hand, post-trade obligations are a source of costs to investment firms. Those costs are typically outweighed by the benefits of post-trade transparency as regards the efficiency of the price formation process, best execution obligations, and fairness for all market participants (reduced information asymmetry). On the other hand, there could be circumstances where the publication would not contribute in achieving these objectives. Therefore, MiFID I covered an exception to the post-trade transparency obligations for investment firms trading outside an RM or MTF in relation to certain type of transactions.6