4.II.4 Concluding remarks

MiFID I provided a similar pre-trade transparency regime for RMs and MTFs. The MiFID I pre-trade transparency rules for RMs and MTFs were part of the broader MiFID I framework to promote competition between trading venues. On the one hand, a high degree of pre-trade transparency was seen as essential to ensure a level playing field between trading venues, the price discovery mechanism in shares was not impaired by fragmented liquidity, and investors thereby not penalised. That being said, MiFID I recognised circumstances where exemptions (waivers) to pre-trade data publication could be necessary. MiFID I did not consider maximum pre-trade transparency as optimal for the EEA financial markets. Under MiFID I four waivers were in place to permit for so-called ‘dark pools’, being pre-trade opaque segments on RMs and MTFs. The intention behind the waivers (dark pools) was to ensure that liquidity on RMs and MTFs was not impaired by unintended consequences of pre-trade data publication.1

The MiFID I approach with respect to pre-trade transparency for RMs and MTFs was fairly top-down. MiFID I intended to leave little flexibility as to the pre-trade transparency that RMs and MTFs needed to publish. To achieve this result, highly harmonised rules were introduced. The MiFID I Directive provided the general pre-trade transparency rules, which were supported by a directly applicable regulation (MiFID I Implementing Regulation). The amount of detail and directly applicable rules were in place to converge pre-trade transparency publication across RMs and MTFs in the EU/EEA.

MiFID I was not entirely top-down. MiFID I still gave flexibility with respect to the pre-trade transparency regime for RMs and MTFs. First of all, the MiFID I pre-trade transparency rules were limited to shares admitted to trading on an RM. Member States were permitted to expand the scope of the pre-trade transparency rules, but this was not obligatory. Second, the MiFID I pre-trade transparency obligations were minimum harmonised.

Member States were permitted to lay down stricter rules than those laid down by MiFID I (the wording ‘at least’ was used). Third, many of the waivers were principle-based. The principle-based nature gave discretion in interpreting the waivers. Fourth, NCAs retained the final responsibility for granting waivers. Although a voluntary process was adopted through CESR/ESMA, this process was non-binding. NCAs were legally responsible to decide whether or not to grant a waiver.