18.IV.1.2.6 MiFID I Review: performing calculations and operating databases

The MiFID I regime was top-down in the sense that it created new operational rules on the EU level, rather than leaving the calculations and estimates necessary for the MiFID I equity pre- and post-trade transparency regime up to national regulation (ISD situation). The reason was that the MiFID I equity pre-trade transparency regime relied on harmonised EU thresholds, namely: (1) a ‘liquid market’ (and the related ‘standard market size’ (relevant for the SI publication obligations) and (2) ‘large in scale orders’ (relevant for the RM/MTF large in scale-waiver/exception to the client limit order display rule). MiFID I required NCAs to collect data, make calculations and estimates, and publish the results (unless CESR already published the results). NCAs also needed to publish a list of the investment firms that qualified as SIs in their territory. CESR was required to consolidate the individual NCA results, as well as the SI lists, and publish it in a single place. CESR fulfilled its obligations through setting up and maintaining two databases, being the MiFID I Database for Shares Admitted to Trading on an RM and the MiFID I Database for SIs.

The aim of the EU calculation and estimation rules was to establish: (a) a common degree of equity pre-and post-trade transparency (similar calculations across the EU), (b) a related level playing field, and (c) an EU equity pre- and post-trade transparency regime that would work in practice (data collection, calculation, and publication). In hindsight, the MiFID I text was too limited to achieve these aims. This was in particular the case for data collection. The MiFID I text relied on transaction reports (post-trade reports to the NCA) to ensure the collection of data. The transaction reports resulted in technical problems in performing the calculations and estimates. CESR provided guidance to solve the situation, among other things, by recommending post-trade data (available under the MiFID I post-trade transparency regime) to be reported to NCAs. CESR also believed it was necessary to provide guidance in performing data calculations and improve the data available in the MiFID I Databases.1