EU Equity pre- and post-trade transparency regulation (LBF vol. 21) 2021/9.IV.2.2.6:9.IV.2.2.6 Performing the calculations and estimates

EU Equity pre- and post-trade transparency regulation (LBF vol. 21) 2021/9.IV.2.2.6

9.IV.2.2.6 Performing the calculations and estimates

Documentgegevens:

mr. J.E.C. Gulyás, datum 01-02-2021

Datum: 01-02-2021
Auteur: mr. J.E.C. Gulyás
JCDI: JCDI:ADS266804:1
Vakgebied(en): Financieel recht / Bank- en effectenrecht
Financieel recht / Europees financieel recht
Financiële dienstverlening / Financieel toezicht

Similar to MiFID I, MiFID II requires NCAs to carry out calculations and estimates. The calculations and estimates are in place to determine the MiFID II equity post-trade transparency requirements (e.g. whether or not a depositary receipt is eligible for deferral of post-trade publication and, if so, for how long).1MiFID II requires the calculations and estimates to be based on the data collected in accordance with the MiFID II data collection provisions (see paragraph 2.2 above).2 Similar to MiFID I, the NCA responsible for making the calculations and estimates is the NCA of the ‘most relevant market in terms of liquidity’ (i.e. under MiFID II the RM/MTF with the highest turnover for that financial instrument).3 New under MiFID II is that the MiFID II calculation and estimation tasks have on a large scale been delegated from the NCAs to ESMA. 4

For the purposes of equity post-trade transparency, MiFID II requires the NCA (or ESMA in case of delegation) to calculate the average daily turnover for each equity instrument (besides ETFs) traded on an RM/MTF on an annual basis.5 The MiFID II text covers detailed methodologies in calculating the thresholds. MiFID II aligns the calculation method of large in scale for equity post-trade transparency with the calculation method for ‘large in scale orders’, as relevant for equity pre-trade transparency.6 The calculation method for the average daily turnover is only relevant for shares, depositary receipts, certificates, and other similar financial instruments (not: ETFs).7 This is because MiFID II considers transactions in ETFs to be large in scale where the transaction is equal to or larger than EUR 1.000.000 (i.e. a fixed number, instead of depending on the average daily turnover).8

Besides calculations, the NCA (or ESMA in case of delegation) needs to perform estimates (e.g. for equity instruments (besides ETFs) that have not yet been traded on an RM/MTF) and recalculations (in case of changes that ‘significantly affect’ previous calculations, such as a new issue of shares or a merger). Similar to the calculation provisions, MiFID II covers detailed rules on how and when such estimates and recalculations need to be performed.9 The rationale of the detailed MiFID II provisions for estimates and recalculations, as well as for the main calculations, is to ensure a consistent and uniform application.10 Along similar lines, ESMA supplemented the MiFID II text with formally non-binding guidance. The guidance of ESMA is in place to ensure clarity and a consistent approach across the EU.11

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Art. 17(1) MiFIR Delegated Regulation 2017/577.

Recital 10 MiFIR Delegated Regulation 2017/577.

Art. 18 and art. 4(1) MiFIR Delegated Regulation 2017/577 and art. 5 MiFIR Delegated Regulation 2017/567.

ESMA (Verena Ross), Regulatory and supervisory developments, the challenges ahead – a European perspective, 20 October 2016 (ESMA/2016/1497), p. 6-7 and recital 39 and art. 28 ESMA Regulation 2010.

Art. 15(2) and art. 17(1) MiFIR Delegated Regulation 2017/587. For an examination of the large in scale-definition for equity post-trade transparency under MiFID II, reference is made to section II above.

Art. 15(2) MiFIR Delegated Regulation 2017/587 covers a cross-reference to the calculation of the large in scale concept for equity pre-trade transparency purposes (art. 7(3) MiFIR Delegated Regulation 2017/587).

Art. 15(2) and art. 7(3-4) MiFIR Delegated Regulation 2017/587. See also art. 7(6-10) MiFIR Delegated Regulation 2017/587. The length of deferral depends on the equity instrument in question. Reference is made to Annex II, Tables 4-6 MiFIR Delegated Regulation 2017/587.

Art. 15(2) and art. 7(2) MiFIR Delegated Regulation 2017/587. The average daily turnover was not deemed suitable for ETFs. For an examination, reference is made to section II(paragraph 2.4.3 above).

For the estimates, see art. 1(5), art. 2(4), art. 3(4), and art. 4(4) MiFIR Delegated Regulation 2017/567 (liquid market), and art. 7(6-7) (large in scale), art. 11(4-5) (standard market size). The recalculation provision can be found in art. 17(3) MiFIR Delegated Regulation 2017/587. The examples of a new issue of shares and a merger are based on CESR, Technical Advice on Possible Implementing Measures for MiFID I, April 2005 (CESR/05-290b), p. 54.

10.

See, for example, recital 1 MiFIR Delegated Regulation 2017/567.

11.

The ESMA guidance provides answers to practical questions, such as that the transaction that are large in scale and have benefitted from a deferral, should be excluded from the total turnover and the number of transactions examined in MiFID II (Annex II, Tables 4-6 MiFIR Delegated Regulation 2017/587). See ESMA, Q&A on MiFID II and MiFIR transparency topics, 8 July 2020(ESMA70-872942901-35), Answer 5.