EU Equity pre- and post-trade transparency regulation (LBF vol. 21) 2021/9.I:9.I Introduction

EU Equity pre- and post-trade transparency regulation (LBF vol. 21) 2021/9.I

9.I Introduction

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MiFID II succeeded the MiFID I framework on 3 January 2018.1 The MiFID II regime consists out of a framework directive (MiFID II Directive), a framework regulation (Markets in Financial Instruments Regulation: MiFIR), and a substantial amount of delegated measures (level 2 measures). MiFID II2 intends to increase the amount, quality, and timeliness of equity post-trade data compared to MiFID I. To achieve this result, MiFID II provides a highly top-down equity post-trade transparency regime. In doing so, MiFID II retains the general equity post-trade transparency framework of MiFID I. Under MiFID II equity post-trade transparency obligations continue to apply to RMs, MTFs, and investment firms operating outside RMs/MTFs. Deferral of equity post-trade publication is still permitted where certain conditions are met. Despite using the general MiFID I framework, MiFID II is different compared to MiFID I. This is apparent in the following changes:

1.

MiFID II expands the asset classes falling within the scope of the equity post-trade transparency regime.3 Under MiFID II equity post-trade transparency rules apply to: (a) shares, depositary receipts, ETFs, certificates, and other similar financial instruments; (b) traded on a trading venue (RM or MTF).

2.

MiFID II introduces a new trading venue, the OTF (Organised Trading Facility). While OTFs are like RMs and MTFs also trading venues, MiFID II confines OTFs to non-equity only. Accordingly, the MiFID II equity post-trade transparency rules do not apply to OTFs.4

3.

MiFID II requires investment firms trading outside an RM or MTF to publish the equity post-trade data through a so-called APA (Approved Publication Arrangement). MiFID II also covers more detail in terms of which investment firm operating outside an RM/MTF needs to publish equity post-trade reports.

4.

MiFID II reduces the maximum timeframe for real-time equity post-trade publication. The timeframe has been reduced from three minutes (MiFID I) to one minute (MiFID II).

5.

MiFID II introduces exceptions to the equity post-trade transparency obligations for investment firms trading outside an RM or MTF. The exceptions are in place to ensure only meaningful post-trade information is published.

6.

MiFID II alters the deferral regime for equity post-trade data publication. On the one hand, MiFID II is stricter. The time limits for deferral have been reduced and the thresholds for being eligible for deferral have been raised. On the other hand, MiFID II is more lenient, as it widens the scope of investment firms that are qualified for deferral of equity post-trade data publication.

7.

Maximum harmonised and rule-based provisions are in place. In contrast to MiFID I, in particular the MiFID I Directive, MiFID II lays down the equity post-trade transparency regime in directly applicable regulations. References indicating minimum harmonisation (MiFID I) have been removed under MiFID II.

8.

A new regime for performing calculations and operating databases has been introduced (the so-called FIRDS/FITRS databases). The reason for the new regime is two-fold. First, MiFID II covers more equity post-trade transparency thresholds compared to MiFID I. Second, MiFID II expands the amount of equity instruments to which the MiFID II equity (pre- and) post-trade transparency regime applies to (see difference 1 above). The result are more rules for market participants, NCAs, and ESMA in making the operational part of the MiFID II transparency regime work.

The eight key changes from MiFID I to MiFID II are the focus of this chapter. Below, the MiFID II equity post-trade transparency for RMs and MTFs is discussed first (section II). Thereafter, the rules for investment firms operating outside RMs and MTFs will be discussed (section III). The MiFID II regime for performing calculations and operating databases are then discussed (section IV). The MiFID II equity post-trade transparency regime is part of the MiFID II Review, which will also be examined (section V).

Finally, concluding remarks are drawn (section VI).

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