5.IV.1.4.4 Level 1 and Level 2 text: Member State option and client consent

Other topics of the MiFID I review were (a) the Member State option and (b) the express consent of client not to disclose unexecuted limit orders. CESR noted that the vast majority of Member States applied the Member State option, thereby requiring investment firms to comply with the rule by sending unexecuted client limit orders to an RM or MTF (point a).1 In addition, CESR noted that in practice clients often expressly instructed their investment firms not to disclose unexecuted limit orders (point b).

CESR recommended the Commission to transform the Member State option into a rule. CESR noted that this not was to impact on the option of clients to instruct their investment firms not to display their unexecuted limit orders.2 The Commission did not accept CESR’s recommendations. The Commission’s position reflected the view that Member States needed to be able to decide whether or not investment firms needed to comply with the rule through sending unexecuted client limit orders to an RM/MTF. The European Parliament and Council accepted the Commission’s proposal. The latter is evident in the final MiFID II text. MiFID II has not changed the Member State option into a rule. Likewise, the possibility for clients to instruct their investment firms not to disclose unexecuted limit orders has been retained.