EU Equity pre- and post-trade transparency regulation (LBF vol. 21) 2021/8.I:8.I Introduction

EU Equity pre- and post-trade transparency regulation (LBF vol. 21) 2021/8.I

8.I Introduction

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MiFID I succeeded the ISD. MiFID I applied from November 2007 and was in place until the start of MiFID II (3 January 2018). MiFID I consisted out of the MiFID I Directive (framework directive) and two implementing measures, being the MiFID I Implementing Directive and the MiFID I Implementing Regulation.1 One of the MiFID I objectives was to open up competition among different types of order execution platforms.2 MiFID I intended to achieve this result, among other things, by abolishing the optional ISD concentration-rule. Under MiFID I investment firms could choose where to trade, provided that best execution-obligations were met.3 To ensure a high quality of order execution in financial instruments, regardless where the order was executed in the new trading environment, MiFID I established a comprehensive regulatory regime.4 A main element of the comprehensive MiFID I regime was the introduction of new trading venues alongside RMs, namely so-called Multilateral Trading Facilities (MTFs) and SIs (SIs).5 Another element were the MiFID I equity post-trade transparency rules. The MiFID I equity post-trade transparency rules were designed to mitigate fragmentation risks, as well as to ensure that investment firms had sufficient incentives to commit capital and deepen overall liquidity.6 Compared to the ISD, MiFID I introduced the following changes with respect to equity post-trade transparency regulation:

1.

MiFID I expanded the equity post-trade transparency regime from RMs to RMs, MTFs, and investment firms operating outside RMs and MTFs.

2.

MiFID I limited the scope of the post-trade transparency regime to shares admitted to trading on an RM. Under MiFID I the term ‘equity’ referred to shares.7 Member States were permitted (not: required) to expand the MiFID I post-trade transparency regime to other financial instruments than shares.8

3.

MiFID I did not require maximum post-trade transparency. RMs, MTFs, and investment firms operating outside such venues were permitted to publish more equity post-trade data than MiFID I required. Furthermore, MiFID I permitted for deferral of post-trade publication where certain conditions were met. Although the ISD also permitted for deferral (and suspension), MiFID I introduced more detail (harmonisation) on the application of the deferral arrangements.

4.

MiFID I provided more harmonisation in terms of the overall post-trade transparency regime. A higher set of post-trade data needed to be published under MiFID I. The post-trade transparency obligations were minimum harmonised, whereas the deferral regime was maximum harmonised.

5.

MiFID I introduced details on when the post-trade information needed to be published (timing). MiFID I required post-trade information to be published in real-time (a maximum of three minutes) during normal trading hours.

6.

MiFID I covered rules on calculations and the operation of databases in order to ensure the MiFID I equity post-trade transparency regime worked in practice.

The six key changes from the ISD to MiFID I are the focus of this chapter. Below, the MiFID I equity post-trade transparency regime for RMs and MTFs is discussed first (section II). Thereafter, the rules for investment firms operating outside RMs and MTFs are discussed (section III). The MiFID I regime for calculations and databases will follow (section IV). Finally, concluding remarks are drawn (section V).

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