9.II.2.4.2 Level 1 text: Length of deferral

During the MiFID I-review some respondents to the CESR consultation argued that the MiFID I delays were often too long to ensure sufficient equity post-trade transparency. It was claimed that, in some instances, investment firms seemed to avail themselves of the maximum delay under MiFID I even when the risks were already unwound.1 Contrarily, others expressed the view that the MiFID I equity post-trade transparency regime was well calibrated and that there was no need for change.2 The recommendations of CESR to the Commission reflected the first view, which argued that the MiFID I delays for equity post-trade data publication were too long. CESR proposed three elements for MiFID II:

About half of the respondents to CESR’s consultation agreed with CESR. It was argued that, while the price offered by a firm taking risk for any given trade might be affected, the overall benefit from improved market transparency, reduced information asymmetries, and lower costs to undertake transaction cost analysis would justify a reduction in delays. In view of these consultees, the end of day maximum time would still allow market participants to hedge against market impact costs.4 It was argued that, at least in some cases, investment firms seemed to avail themselves of the maximum delay under MiFID I even where their positions had already been unwound.5

The other half of the respondents opposed CESR’s proposal. These respondents argued, among other things, that the CESR proposals focused primarily on the shortening of the maximum deferral to the end of the day. These respondents stated that, particularly for trades executed late in the day, it would allow very little time for investment firms to offset any risk they took on prior to the publication of the trade information.6 It was also argued that CESR needed to reconsider the ‘end of day’ maximum reporting period, possibly extending it to 24 hours, the next morning or the end of the next trading day. It was claimed that otherwise this may result in an ‘end of day’ trade needing to be published sooner than a smaller trade that received a 120-minute delay.7

The Commission took a similar position in drafting MiFID II.8 The Commission’s MiFIR Proposal required the deferral regime to be specified through level 2-measures.9 The European Parliament and Council took a similar position.10 ESMA was required to provide advice to the Commission on drafting the level 2 measures. The Level 2 measures, as advised by ESMA, are set out below.