8.II.2.4.2 Length of deferral

The ISD did not specify the length of deferral concerning post-trade publication.1 The EU wanted to provide more clarity under MIFID I. The MiFID I Directive requested the Commission to provide implementing measures in the context of deferral.2 The Commission asked CESR for advice.

CESR noted that a balance needed to be found between the merits of transparency versus the position risks of the intermediaries engaged in the large trades. CESR indicated that it wanted to ensure that deferred publication was confined to the largest trades and that the time provided for delay was no longer than reasonably required for the intermediary that actively worked off the position risk.3 CESR issued a consultation in which it proposed three share categories for deferred publication based on the average daily turnover. This also included different time lengths based on the minimum qualifying size. A higher minimum qualifying size permitted a longer delay. In effect, CESR proposed post-trade publication deferral to be based on a so-called ladder-model. The greater the trade size, the longer the permitted delay.4 CESR proposed to set the maximum delay at the end of the second trading day following the trade.5

CESR’s proposal received mixed reactions. Many respondents argued that the proposed thresholds were too high and the delays too short, in particular (but not exclusively) for less and mid-liquid shares.6 Other respondents disagreed with this view, noting the thresholds and delays were not too high, respectively too short. Several respondents also pointed out that trading volume is not spread evenly over the day and that unwinding a risk is not possible in a linear way (i.e. a larger position would need relatively more time to unwind than a smaller one). Several respondents in addition argued that the three categories proposed by CESR were not granular enough.7

In the end, CESR tried to accommodate the concerns raised by the respondents. CESR proposed to extend the time available for post-trade publication delay (i.e. from 120 to 180 minutes) and it lowered the fixed thresholds in the most liquid category. The aim of CESR was to support the concerns raised in respect of the non-linearity of unwinding position risks.8 At the same time, CESR did not change the number of classes (i.e. three). Neither did CESR change the maximum delay (i.e. at the end of the second trading day after the trade).9

The Commission’s final position (as apparent in the final MiFID I text) was more liberal compared to CESR’s advice. The Commission’s position reflected concerns about insufficient possibilities to unwind large positions. The Commission accepted CESR’s proposals in terms of the lowered thresholds in the most liquid category and the intra-day delay of 180 minutes (instead of 120 minutes), but provided more flexibility to obtain post-trade publication deferral. The final MiFID I text provided (i) four classes for large in scale-trades (instead of three as proposed by CESR); and (ii) a maximum delay of three trading days after the trade (instead of two as proposed by CESR).10 In effect, the final MiFID II-text required less post-trade transparency compared to CESR’s proposal.