5.II.3.2 Background

Under MiFID I the supervisory convergence of waivers was conducted through a voluntary waiver process that took place within CESR/ESMA.1 CESR was not satisfied with the level of supervisory convergence. During the MiFID I-review, CESR proposed to support more supervisory convergence through a harmonised process within ESMA.2 CESR also proposed to give ESMA the power to monitor the waivers on an ongoing basis, including a review of the waiver’s use.3 CESR also considered the possibility of legal exemptions instead of waivers. Legal exemptions would permit RMs and MTFs to directly be exempted from pre-trade transparency publication, that is – without a granting procedure of a NCA. The main advantages of this option would be legal certainty and a level playing field. However, CESR considered it appropriate to retain the MiFID I discretion regarding the use of the pre-trade transparency waivers and a role for CESR/ESMA in the waiver process.4 The view of CESR reflected the aim of preventing a rigid EU approach and lack of room for market innovations in terms of waivers.

The Commission took a similar position as CESR. In the MiFID II proposal, the Commission proposed to maintain the overall MiFID I waiver system, instead of legal exemptions. The Commission aimed to make the granting process of waivers across the Member States more consistent and coherent.5 The Commission put strong emphasis on ESMA. The Commission suggested to formalize the voluntary joint waiver process of MiFID I into law. Under this regime NCAs would be obliged to notify ESMA and other NCAs of the intended use of waivers and to provide an explanation regarding the functioning of the waiver.6 ESMA would be required to publish an opinion whether the use of the waiver was consistent with MiFID II. If a NCA proposed to grant a waiver contrary to an ESMA opinion and another NCA disagreed with this, the matter could be send to ESMA for binding mediation.7 The Commission also recommended requiring ESMA to monitor the waivers on an ongoing basis and to report annually to the Commission about their use.8

The European Parliament largely agreed with the Commission’s proposal, albeit some amendments were made. The European Parliament clarified that ESMA’s opinion would be non-binding.9 The European Parliament also proposed to harmonize the possibility for NCAs to withdraw the waiver. In view of the European Parliament, withdrawal was permitted where the waiver deviated from its original purpose or if the NCA believed that the waiver was used to circumvent the MiFID II pre-trade transparency rules.10

The Council’s position was overall aligned with the position of the European Parliament.11 However, some Member States within the Council suggested to give ESMA more power. These Member States preferred to let ESMA make a binding decision, rather than a non-binding opinion, on the legality of the waivers.12 Contrarily, other Member States uttered concerns about the legality of a binding decision at ESMA’s availability considering the so-called ‘Meroni Doctrine’. Reflecting these concerns, the Council ultimately proposed to give ESMA only the power to provide a non-binding opinion.13

The foregoing drafting process is evident in the final MiFID II text. MiFID II has introduced a harmonized waiver process with the aim to enhance supervisory convergence. ESMA can provide non-binding opinions on the legality of the waivers. Binding meditation is possible where requested by a dissenting NCA. ESMA also needs to review the waivers on an ongoing basis. Under MiFID II NCAs can only grant or withdraw a waiver in accordance with harmonized waiver process provisions.