EU Equity pre- and post-trade transparency regulation (LBF vol. 21) 2021/5.V.2.1.2:5.V.2.1.2 Commission and ESMA guidance

EU Equity pre- and post-trade transparency regulation (LBF vol. 21) 2021/5.V.2.1.2

5.V.2.1.2 Commission and ESMA guidance

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A strict reading of the MiFID II share trading-obligation would mean that EU shares traded on not (yet) equivalent third country trading venues cannot be traded on the third country trading venue in question. Since such a prohibition would not appear appropriate in all situations (i.e. shares that have their primary market or main pool of liquidity outside the EU),1 ESMA and the Commission have provided clarification. ESMA and the Commission have clarified the following:

‘the absence of an equivalence decision taken with respect to a particular third country’s trading venues indicates that the Commission has currently no evidence that the EU trading in shares admitted to trading in that third country’s regulated markets can be considered as systematic, regular and frequent.’2

The guidance of the Commission and ESMA makes clear that as a general rule where a third country trading venue is not (yet) deemed equivalent, share trading on the third country trading venue is considered to be non-systematic, ad-hoc, irregular and infrequent. In other words, where a third country is not deemed equivalent, the exception to the MiFID II share trading-obligation applies. In July 2020 ESMA stated that the guidance is sufficient for the moment.3 For a more detailed examination of the current ESMA view, reference is made to the MiFID II Review (section VII below).

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