9.III.1.8.4 Difference 2: anonymous publication through an APA

New under MiFID II is that the equity post-trade transparency reports for investment firms are always anonymous, also for SI equity post-trade reports (as published through an APA). The change stems from the MiFID II drafting process. ESMA believed it was necessary to publish equity post-trade the venue of publication in order to identify the publishing entity in the market identifier code (MIC).1 In contrast with the situation under MiFID I, ESMA argued that the MIC also needed to include the identify of an SI. As examined in chapter 8, MiFID I permitted SIs to remove their identify from equity post-trade data reports, provided the SI published aggregated data about the SI’s trading activity in quarterly post-trade report (i.e. delay publication of SI identity). In this situation, MiFID I permitted, by way of exception, the SI to use the general code ‘SI” instead of the venue identification. Investment firms not being an SI were not required to include their identity in MiFID I equity post-trade data.2 ESMA acknowledged that the MiFID I possibility enabled SIs to reduce position risks. However, ESMA also said ‘it is important to provide investors with an overview of liquidity pools in relation to an instrument’.3 In view of ESMA, there was in effect an argument to disclose the SI’s identity in equity post-trade data. ESMA added that the MiFID II equity pre-trade transparency obligations also require SIs to publish their identity in the SI quotes (in relation to liquid equity instruments for which the investment firm is an SI and above standard market size).4 ESMA believed that for these reasons it would be consistent to align the MiFID II equity post-trade transparency requirements with those of the MiFID II equity pre-trade transparency regime in requiring SIs to disclose their identity.5

The ESMA proposal did not make it into the final MiFID II text. MiFID II does not require to include the identity of the SI in the MiFID II equity post-trade data (in contrast to the ESMA proposal). In contrast to RMs and MTFs, investment firms operating outside such RMs and MTFs – including SIs – are not required to display their identity in equity post-trade reports. Instead, investment firms operating outside RMs and MTFs can suffice with the general (anonymous) ‘XOFF’ code. The rationale here is to protect investment firms against position risks.6 The situation is in effect the same as for investment firms trading on an RM or MTF, which are also able to trade anonymously on the RM or MTF (see section II above). The complexity is the situation with SIs. On the one hand, SIs share some regulated features with RMs and MTFs, although SIs are formally not a ‘trading venue’ under MiFID II. Accordingly, the level playing field between trading venues, i.e. RMs, MTFs, and SIs, would also require SIs – alongside RMs and MTFs – to publish the SI identity.7 On the other hand, SIs always trade on own account (while executing a client order) and SIs accordingly face position risks, in contrast to RMs and MTFs. The final MiFID II text ‘emphasis’ the latter. SIs are not required under MiFID II to publish the identity in the equity post-trade report (as published through an APA). The rationale here is to protect SIs against position risks following identity exposure.8