18.III Why has EU equity pre- and post-trade transparency regulation increased?

The second part of the synthesis answers the research question why EU equity pre- and post-trade transparency has increased from the ISD to MiFID II. The answer of the synthesis is based on the research findings about the EU objectives for EU equity pre- and post-trade transparency regulation. Based on experience from the ISD to MiFID II, the synthesis will show that the EU objective for EU equity pre- and post-trade transparency regulation is the establishment of an integrated European capital market (Capital Markets Union). The complexity is that EU institutions (European Parliament, Council, the Commission, and ESMA, including the predecessors CESR and FESCO), as well as other stakeholders, such as market participants, often disagree on how to achieve such an integrated European capital market by means of equity pre- and post-trade transparency regulation.

In other words, there is often no consensus as to what the ‘optimal degree’ of equity pre- and post-trade transparency is, including whether or not to intervene with regulation (bottom-up, top-down or a combination of both). At best one can say that the EU prefers a high degree of equity pre- and post-trade transparency, but that individual Member States, EU institutions, and stakeholders (e.g. RMs and SIs) have different opinions as to what a ‘high degree’ of equity pre- and post-trade transparency constitutes and how it should be achieved. Consequently, EU equity pre- and post-trade transparency regulation has from the ISD to MiFID II often been a political compromise. This is in particular true for sensitive issues, such as the extent of dark liquidity (i.e. trading without pre-trade transparency), data consolidation, and equity pre- and post-trade data prices. The synthesis shows that the final EU opinion from the ISD to MiFID II has been determined by a combination of three factors. The three factors are: (1) market philosophies; (2) market structure; and (3) technological innovation. These factors are examined below.