18.IV.1.3.6 MiFID II Review: equity post-trade transparency for RMs, MTFs and investment firms

MiFID II covers equity post-trade transparency requirements for RMs, MTFs, and investment firms operating outside such venues. The ESMA MiFID II Review shows that ESMA is largely satisfied about the MiFID II equity post-trade transparency regime for RMs, MTFs, as well as for investment firms operating outside RMs and MTFs. ‘Largely’, because ESMA raises two particular concerns. First, ESMA wants to increase post-trade transparency for ETFs by permitting less deferral compared to the current regime.1 The change would align the deferral percentages of ETFs with shares and depositary receipts and result in more equity post-trade transparency. The ESMA proposal should be viewed from a traditional debate in EU equity post-trade transparency regulation, namely between transparency and inventory risk. Enhanced equity post-trade transparency (for ETFs in this case) can increase price formation and liquidity, but it can also harm liquidity provision by investment firms taking temporary risk positions. ESMA takes the position – similar to the ESMA equity pre-trade transparency proposals (see paragraphs above) – that equity (post-trade) transparency should prevail.

Second, ESMA proposes to change the current equity post-trade transparency regime for investment firms operating outside RMs and MTFs. ESMA wants to keep the current MiFID II equity post-trade transparency regime between RMs, MTFs and investment firms operating outside RMs/MTFs aligned as much as possible. The main change that ESMA proposes is that investment firms operating outside RMs and MTFs need to report and flag transactions that are not subject to the MiFID II share trading-obligation, but subject to equity post-trade transparency to FITRS (a MiFID II database).2 The rationale here is to increase the amount of data available for trades taking place outside RMs, MTFs, and SIs (and equivalent third country trading venues), all being eligible venues under the MiFID II share trading-obligation.3 The ESMA proposals of the MiFID II Review reflect the aim to maintain a level playing field, as well as the aim to increase data in order to monitor market behaviour. The Commission’s MiFID II consultation seeks to verify the ESMA observations and whether stakeholders agree with the ESMA proposals.4