5.VI.2.3.7.1 Level 2 text: details of the data collection provisions

ESMA assisted the Commission in drafting the details for the data collection of the double volume cap on Level 2. As noted, the calculations of the double volume cap mechanism require data on two caps, being trading volume and use of the reference price and negotiated trade waiver on individual RMs/MTFs and all RMs/MTFs combined. ESMA proposed two sources of data, namely: (1) RMs and MTFs and (2) CTPs. ESMA proposed the first source of data, being RMs and MTFs, because the double volume cap mechanism concerns trading and waiver activity on RMs and MTFs. ESMA proposed CTPs as a second source of data for checking the validity and completeness of data submitted by RMs and MTFs. ESMA proposed the two sources of data, given the extreme sensitivity of the double volume cap publication (i.e. potential suspensions of the waivers).1 Some respondents questioned the ESMA proposal in light of, in their view, an unnecessary burden (one source of data was preferred) and the uncertainty whether CTPs would be authorised under MiFID II. By contrast, other respondents welcomed the ESMA proposal. These respondents emphasized the extreme sensitivity of the double volume cap publication and deemed cross checks of data necessary.2 In the end, ESMA sticked to the initial ESMA proposal. ESMA advised the Commission to include two sources of data, being RMs, MTFs and CTPs.3

With regard to the content to be reported to the NCA (or ESMA in case of delegation), ESMA initially proposed to require so-called value thresholds (i.e. the number of units traded multiplied by price) to be reported.4 Some respondents to the ESMA consultation favoured a so-called volume threshold instead (i.e. considering only the number of units traded). One argument in favour of such an approach was that no conversion would be required. In view of these respondents, conversion would introduce distortions in the calculation. The possibility is one of the caps being breached just because of currency swings.5 ESMA reacted, among other things, by noting that the price remains an essential element that should be taking into consideration in order to adequately monitor the volume of trading undertaken under the waivers and the economic impact this has on financial markets. ESMA appreciated the concern that conversion could introduce distortion in the calculations.6 ESMA advised the Commission to retain the value threshold (i.e. number of units traded multiplied by price), whilst requiring to convert the volumes executed in different currencies into one common currency. ESMA emphasised that RMs and MTFs would not be responsible for the conversion of the volumes in light of additional operational risks and possible errors. ESMA instead proposed data to be reported to the NCAs and ESMA using the original currency and the conversion into euros would be managed, where necessary, centrally by ESMA.7

ESMA also gave advice with regard to the frequency of the reporting. ESMA proposed to receive the data twice a month for two reasons, namely: (1) to minimise the impact of potential data errors (twice a month enables to detect data errors as soon as detected) and (2) to be prepared from the outset for the potential publication of the ad hoc-calculations (3.75 and 7.75 percent breach).8 ESMA received no comments against collecting the data twice a month. Accordingly, ESMA retained the proposal for RMs and MTFs to report the data twice a month to the responsible NCA (or ESMA in case of delegation). To simplify the periodic reports, ESMA advised the trading volumes not to be for the previous 12 months (necessary for a part of the double volume cap calculations), but only for the last half of the calendar month.9 ESMA proposed RMs and MTFs would have to send all data required on the first and sixteenth day of each calendar month (by 13.00 CET) to their respective NCA. Concerning the ad hoc-requests by NCAs to RMs, MTFs, and CTPs, ESMA suggested RMs, MTFs, and CTPs to have in place the systems and IT infrastructures to submit, by close of business on the next working day following the request, data for the last 12 months. ESMA noted the ad hoc-data could, for example, be used in case errors are detected in the main data sample.10

To ensure timely publication of data each month, ESMA developed templates for a data format. The templates were proposed to ensure ‘seamless aggregation of volumes’ across RMs and MTFs. ESMA suggested the templates to be completed by stakeholders, whilst ESMA already provided some specifications in order to ensure sufficient harmonisation.11 ESMA in particular emphasized the market identifier codes (MICs) of RMs and MTFs. ESMA observed that under MiFID I the MICs used by RMs and MTFs did not always provide the sufficient degree of granularity. ESMA observed that in some cases, where for example an RM and MTF are operated by the same legal entity, the same MIC was used. To ensure sufficient granularity for the double volume cap calculations, ESMA proposed a unique MIC for each RM and MTF.12

The Commission adopted the recommendations of ESMA. This is visible in the final MiFID II text. MiFID II requires RMs, MTFs, and CTPs to report to NCAs (or ESMA in case of delegation) and NCAs are in turn required to submit the data to ESMA. MiFID II reflects the ESMA recommendations on the content (value threshold and single currency), frequency (reporting twice a month), and format of the data necessary for the double volume cap calculations (harmonised format with emphasis on individual MICs for RMs and MTFs).