9.II.2.2 Conditions

The MiFID II-regime retains the overall MiFID I framework for permitting deferral of equity post-trade publication. MiFIR notes that the NCA of the RM/MTF is permitted to provide for deferred publication based on the type or size of the transaction involved.1 In particular, the NCA can authorize deferred publication in respect of transactions that are large in scale compared with the normal market size for that equity instrument or that class of equity instruments.2 RMs and MTFs need to obtain prior approval of the NCA of proposed deferral arrangements and shall clearly disclose those arrangements to market participants and the public.3 Similar provisions were in place under MiFID I.4 The MiFID II provisions for equity post-trade data publication deferral are not exactly the same as under MiFID I. MiFID II introduces several differences. The main differences compared to MiFID I are the following:

First, the MiFID II deferral regime applies to equity(-like) instruments. Under MiFID I only shares were eligible for deferral (i.e. considered to be equity).5MiFID II covers a deferral regime for (a) shares and depositary receipts; (b) ETFs; and (c) certificates and other similar financial instruments.6

Second, MiFID II changes the scope for deferral of equity post-trade data publication. MiFID II does so in two ways. First of all, a MiFIR Delegated Regulation specifies that deferred publication is permitted where the transaction is between an investment firm (a) dealing on own account other than through matched principal trading; and (b) another counterparty.7 Through the reference to ‘another counterparty’ (point b) MiFID II expands the scope compared to MiFID I.8 Deferral under MiFID I was only permitted in relation to ‘clients’.9 Second, MiFID II limits the scope compared to MiFID I in the sense that deferral is not permitted in case of matched principal trading.10 MiFID I did not exclude matched principal trading from the benefit of deferred publication.11 The rationale for the expansion in scope is to cover every situation where the investment firm is at risk. MiFID II only wants to permit deferral where the investment firm is at risk. For this reason, matched principal trading is excluded from the benefit of deferred publication.12

Third, MiFID II shortens the delays for shares compared to MiFID I (MiFID I only applied to Shares admitted to trading on an RM). Under MiFID II a delay is only permitted where the size of the share transaction is equal to or exceeds a pre-defined minimum qualifying size.13 The length of the deferral depends on the average daily turnover of the equity instrument and the size of the transaction.14 The possibilities under MiFID II start at 60 minutes and go up until the end of the next trading day (MiFID I permitted the end of the third trading day as a maximum).15 In addition, the intraday delays for shares have been shortened from 180 to 120 minutes; and the thresholds for transaction sizes have been raised.16 The overall objective here is to enhance transparency compared to MiFID I.17

Fourth, MiFID II covers additional classes for the average daily turnover compared to MiFID I. Similar to the RM/MTF large in scale-waiver and client limit order display-rule exception for equity pre-trade transparency, MiFID II covers eight classes of average daily turnover (i.e. MiFID I covered four classes) for shares (and depositary receipts). The additional classes have been created on (i) the illiquid, (ii) the moderately liquid, and (iii) the ‘super liquid’ end of the scale.18 The aim here is to allow for the thresholds to be set more accurately to the actual liquidity of the share in question.19 The alignment with the equity pre-trade transparency regime (i.e. eight classes of average daily turnover) is to facilitate the implementation of the MiFID II regime (simplicity across the equity pre- and post-trade transparency regime for shares).20 The effect of the MiFID II approach is that the transparency thresholds for ‘large in scale’ share transactions has been reduced compared to MiFID I. Under MiFID II smaller transaction sizes in shares are eligible for post-trade transparency deferral. MiFID II is in that respect less strict compared to MiFID I.21 A main reason here is that the size of share transactions has declined from MiFID I to MiFID II, in particular due to algorithmic trading (‘slicing’ of trades) (see paragraph 2.4.3 below).

Fifth, and finally, MiFID II has introduced an observing role for ESMA and the Commission in authorizing deferral arrangements. MiFID II requires ESMA to monitor the application of the deferred publication arrangements by the NCAs. ESMA needs to submit an annual report to the Commission on how the arrangements are applied in practice.22 ESMA can also provide binding mediation. Where an NCA disagrees with a deferral authorization by another NCA, the disagreeing authority can refer the matter to ESMA for binding mediation.23