EU Equity pre- and post-trade transparency regulation (LBF vol. 21) 2021/4.II.1.5.2:4.II.1.5.2 Limitation to shares admitted to trading on an RM

EU Equity pre- and post-trade transparency regulation (LBF vol. 21) 2021/4.II.1.5.2

4.II.1.5.2 Limitation to shares admitted to trading on an RM

Documentgegevens:

mr. J.E.C. Gulyás, datum 01-02-2021

Datum: 01-02-2021
Auteur: mr. J.E.C. Gulyás
JCDI: JCDI:ADS266466:1
Vakgebied(en): Financieel recht / Bank- en effectenrecht
Financieel recht / Europees financieel recht
Financiële dienstverlening / Financieel toezicht

MiFID I changed several aspects of the ISD pre-trade transparency obligations. A main change was that under the ISD the pre-trade transparency rules for RMs (MTFs did not yet exist under the ISD) applied to all financial instruments.1 MiFID I changed this position by limiting the scope to shares admitted to trading on an RM. The limitation stems from the Commission’s MiFID I proposal.2 In drafting MiFID I, the Commission stated that risks to price formation and overall market efficiency under MiFID I would primarily relate to shares.3 In view of the Commission, there was a ‘lack of economic or regulatory justification’ for imposing pre-trade (and post-trade) transparency rules to financial instruments other than shares.4 The Commission proposed the pre-trade (and post-trade) transparency obligations only to apply to shares admitted to trading on an RM.5

The Commission’s proposal received mixed replies. For example, the ECB critisized the limitation to shares, noting that the proposal left bonds outside the regulatory framework. The ECB also noted that the Commission provided scarce motivation for the limitation to shares.6 In contrast with the ECB’s criticism, the limitation of pre-trade (and post-trade) transparency rules to shares seemed relatively uncontroversial within the European Parliament and Council.7 Hence, the Commission’s proposal was transformed into EU regulation. The latter is evident in the final MiFID I text. MiFID I limited the scope of the pre-trade (and post-trade) transparency obligations for RMs and MTFs to shares (admitted to trading on an RM).8 Member States were permitted to expand the transparency obligations to other financial instruments than shares.9

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Art. 1(13), art. 21 and Annex Section B ISD.

By contrast, CESR noted in its guidance for ATSs under the ISD that ATSs (‘qualifying systems’) that provided trading in instruments traded on an RM needed to make relevant trading data available on a timely basis. CESR referred to this transparency standard in relation to all financial instruments apparent in the ISD Annex (CESR, Standards for Alternative Trading Systems, July 2002(CESR/02-086b), p. 10).

Commission, Revision of Investment Services Directive (93/22/EEC), Second Consultation, 25 March 2002, p. 3 and 9. The Commission referred to the term ‘equity’, which in this context meant ‘shares’ only.

Commission, Revision of Investment Services Directive (93/22/EEC), Second Consultation, 25 March 2002, p. 3 and 9.

Art. 27-30 and art. 41-42 Commission, Proposal for a Directive of the European Parliament and of the Council on investment services and regulated markets, and amending Council Directives 85/611/EEC, council directive 93/6/EEC and European Parliament and Council Directive 2000/12/EC, 19 November 2002 (COM(2002) 625 final) (hereafter: Commission, MiFID I Proposal, 19 November 2002 (COM(2002) 625 final).

ECB (European Central Bank), opinion of the European Central Bank of 12 June 2003 at the request of the Council of the European Union on a proposal for a Directive of the European Parliament and of the Council on investment services and regulated markets, and amending Council Directive 85/611/EEC, Council Directive 93/6/EEC and European Parliament and Council Directive 2000/12/EC (COM(2002) 625 final) (CON/2003/9) (2003/C 144/06) (hereafter: ECB, Opinion on MiFID I Proposal, 12 June 2003(CON/2003/9)), point 15.

European Parliament, MiFID I Proposal Report, 4 September 2003(A5-0287/2003) and Council, common position (EC) No 9/2004 adopted by the Council on 8 December 2003 with a view to the adoption of a Directive 2004/. . ./EC of the European Parliament and of the Council of . . . on financial instruments markets, amending Council Directives 85/611/EEC and 93/66/EEC of the European Parliament and of the Council and Directive 2000/12/EC of the European Parliament and repealing Council Directive 93/22/EEC (2004/C 60 E/01) (hereafter: Council, MiFID I Common Position, 8 December 2003(2004/C 60 E/01).

Art. 29(1) and art. 44(1) MiFID I Directive.

Recital 46 MiFID I Directive.