EU Equity pre- and post-trade transparency regulation (LBF vol. 21) 2021/9.III.1.8.3:9.III.1.8.3 Difference 1: exceptions to the equity post-trade transparency obligations

EU Equity pre- and post-trade transparency regulation (LBF vol. 21) 2021/9.III.1.8.3

9.III.1.8.3 Difference 1: exceptions to the equity post-trade transparency obligations

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The previous regime (MiFID I) covered exceptions to the equity post-trade transparency obligations for investment firms operating outside an RM or MTF. The aim of the exception was to find a balance. Equity post-trade obligations are a source of costs to investment firms. Those costs can be – but are not necessarily – outweighed by the benefits of equity post-trade transparency as regards the efficiency of the price formation process, best execution obligations, and fairness for all market participants (reduced information asymmetry). MiFID I recognised there could be circumstances where the publication would not contribute in achieving the positive effects of post-trade data publication. Therefore, MiFID I covered an exception to the equity post-trade transparency obligations for investment firms trading outside an RM or MTF in relation to certain types of transactions.1

In a legacy from MiFID I, MiFID II covers exceptions for the equity post-trade transparency obligations of investment firms trading outside an RM or MTF. MiFID I permitted exceptions in relation to (a) securities financing transactions; (b) the exercise of options or of covered warrants; and (c) primary market transactions in relation to certain financial instruments.2 ESMA proposed to renew the MiFID I list during the MiFID II drafting process. The renewal was deemed necessary given that the scope of the post-trade transparency regime would increase from shares to equity instruments. ESMA proposed to include from the scope of post-trade disclosure investment firms transactions that:

1.

do not have to reported to the NCAs under the MiFID II transaction reporting regime (article 26 MiFIR).3

2.

give-up/give-in transactions.4

3.

transactions executed by a management company as defined in Article (2)(1)(b) of Directive 2009/65/EC or an alternative investment fund manager as defined in Article 4(1)(b) of Directive 2011/61/EU which transfers the beneficial ownership of financial instruments from one collective investment undertaking to another and where no investment firm is a party to the transaction.

4.

transfers of financial instruments as collateral in bilateral transactions or in the context of a CCP margin and collateral requirements or as part of the default management process of a CCP.5

ESMA proposed the list of exceptions to: (i) avoid unnecessary operational challenges and costs for investment firms; (ii) avoid polluting post-trade data with non-meaningful information; (iii) ensure consistency with transactions not reportable to NCAs; and consistency with transactions not subject to trading obligations for shares.6 The Commission accepted ESMA’s proposals. The latter is evident in the final MiFID II text. MiFID II covers a list of exceptions as set out under points (1-4) above.7

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