5.II.5 Concluding remarks

MiFID II introduces a more top-down equity pre-trade transparency regime for RMs and MTFs compared to MiFID I. First, MiFID II expands the scope of financial instruments that fall under the rule to equity instruments admitted to trading on an RM or traded on a trading venue (including actionable indications of interest). Second, the equity pre-trade transparency rules are all laid down in the directly applicable framework regulation (MiFIR), as supported by maximum harmonising MiFID II implementing regulations. Third, MiFID II requires multilateral internal matching systems in equity instruments to convert into an MTF and accordingly comply with the MTF pre-trade transparency rules. Fourth, the MiFID II waiver have shifted from a principle to a rule-based approach. Several of the waivers have been tightened in their use compared to the previous regime. Fifth, MiFID II covers a double volume cap. The aim here is to restrict the amount of equity trading taking place under the reference price waiver and one element of the negotiated trade waiver. Sixth, and finally, MiFID II harmonizes the voluntary MiFID I waiver process into law. As a result, ESMA plays a more prominent role in granting, as well as monitoring of, the waivers across the Member States. The rationale behind the increase in top-down elements is to reduce the amount of dark trading apparent compared to MiFID I. MiFID II intends to enhance the amount of pre-trade transparency displayed by RMs and MTFs in the European equity markets.

Despite the top-down approach, MiFID II still leaves flexibility when it comes to equity pre-trade data publication by RMs and MTFs. To start, NCAs remain legally responsible for granting the waivers. No legal exemptions that directly apply to RMs and MTFs are in place (unless provided under national law). MiFID II tightens the waiver process, but the NCAs officially remain in charge. Furthermore, RMs and MTFs can voluntarily publish equity pre-trade data beyond the MiFID II requirements, that is – be stricter than MiFID II. It is questionable whether the overall top-down approach of MiFID II is sufficient to achieve the MiFID II goals (enhanced pre-trade transparency compared to MiFID I). On the one hand, MiFID II has been able to suspend 1600 equity instruments using the reference price and a certain type of negotiated trade waiver. This has reduced the amount of trading in dark pools under these waivers. On the other hand, MiFID II potentially leaves room to circumvent the pre-trade transparency rules for RMs and MTFs. A notable example is the growth in frequent batch auctions under MiFID II. The MiFID II equity pre-trade transparency regime is part of the MiFID II Review (see section VII below).