8.II.2.4.1 Goals

During the ISD-review the Commission noted that transparency may come at a price in terms of reduced liquidity provision to market participants. The Commission stated that forcing ‘dealers and broker-dealers’ to display the terms at which they are willing to buy or sell instruments may reduce their ability to trade at a profit, and expose them to strategic trading by other market participants.1 The Commission noted that rules designed to promote an absolute level of transparency would oblige dealers and broker-dealers to expose their trading positions to such an extent that they would no longer be willing to provide liquidity support to the market.2 In other words, exceptions to transparency were deemed necessary. This included exceptions in the form of deferral of post-trade publication (instead of maximum post-trade transparency). Deferral was seen as justified in preserving liquidity. Similar perspectives were apparent in the positions of the European Parliament and Council in drafting MiFID I.3

This perspective was not new. Deferral of post-trade publication was already seen as necessary under the ISD. The ISD permitted for deferral (and also suspension) of post-trade publication where certain conditions were met.4 What changed from the ISD to MiFID I, however, was the increase of harmonisation. Whereas the ISD encompassed broad principles, MiFID I sought to provide clarity on the application of the deferral arrangements across the Member States. In contrast with the MiFID I post-trade transparency obligations, MiFID I covered maximum harmonised provisions on the application of deferral. The provisions were amplified through details available in the MiFID I Implementing Regulation. The increase in harmonisation reflected the aim of MiFID I to provide for a comprehensive transparency regime, which would leave little differences across the Member States. ‘Little’, since deferral was still a matter for NCAs (albeit within the detailed MiFID I boundaries for deferral). In sum, from an abstract level the goal of post-trade transparency deferral did not change from the ISD to MiFID I. What did change was the amount of harmonisation. In view of the EU, the competitive MiFID I setting required an increase in harmonised deferral provisions.