5.IV.2 Concluding remarks

In a legacy from MiFID I, MiFID II covers a client limit order display rule for shares. MiFID II changes the rule in terms of scope and publication arrangements, but overall the provision has not changed. The client limit order display rule aims to find a balance between free competition (investment firms can still internalise limit orders from clients) versus better execution possibilities for unexecuted limit orders, as well to public valuable pre-trade information to the market. Compared to MiFID I, the approach of MiFID II is even more top-down.MiFID II introduces even more harmonised rules for investment firms for publishing unexecuted client limit orders. MiFID II in particular no longer permits publication through ‘other means’, but only through authorised data publication service providers (in addition to sending the order to an RM and/or MTF).

Despite the top-down approach, MiFID II still leaves flexibility for investment firms when it comes to the publication of unexecuted client limit orders. Under MiFID II investment firms can still execute limit orders in-house (although under MiFID II only through internalisation), as long as this is done immediately. Secondly, several exceptions to the rule are in place. Client can decide not to disclose unexecuted limit orders and a waiver can be granted limit orders that are large in scale. Third, and finally, a Member State option is still in place. Member States can (not: must) decide that investment firms need to comply with the rule by sending unexecuted client limit orders to an RM or MTF. In effect, not all unexecuted client limit orders are (immediately) displayed to the market. The MiFID II rule therefore reflects the aim to balance between the merits of competition versus mitigating fragmentation risks, reducing search costs, and supporting the price discovery process.