EU Equity pre- and post-trade transparency regulation (LBF vol. 21) 2021/4.II.1.5.7:4.II.1.5.7 Increase in harmonisation

EU Equity pre- and post-trade transparency regulation (LBF vol. 21) 2021/4.II.1.5.7

4.II.1.5.7 Increase in harmonisation

Documentgegevens:

mr. J.E.C. Gulyás, datum 01-02-2021

Datum: 01-02-2021
Auteur: mr. J.E.C. Gulyás
JCDI: JCDI:ADS267069:1
Vakgebied(en): Financieel recht / Bank- en effectenrecht
Financieel recht / Europees financieel recht
Financiële dienstverlening / Financieel toezicht

The ISD pre-trade transparency obligations were laid down in a directive. The ISD obligations were minimum harmonized. In addition, no clarifications were in place through delegated measures. The broad and further undefined measures left scope for deviations across Member States.1 Perhaps not surprisingly, the Commission observed ‘enormous discrepancies’ in the level of transparency across Member States after the ISD entered into force.2

The EU wanted to change the situation with MiFID I. A further increase in harmonisation was seen as an important tool to limit the deviations across Member States. The Commission, European Parliament, and Council all believed it was necessary to introduce a ‘comprehensive transparency regime applicable to all transactions in shares (…)’.3 The competitive market setting envisioned for MiFID I drove the aim for a comprehensive transparency regime. Accordingly, MiFID I introduced an implementing regulation to provide the details of the general pre-trade transparency obligations for RMs and MTFs.4 However, no maximum harmonised pre-trade transparency obligations for RMs and MTFs were intended for MiFID I. The Council introduced the term ‘at least’ to make the minimum harmonized nature of the pre-trade transparency obligations clear.5 The latter reflected the aim to generate a high, but minimum, level of pre-trade transparency through MiFID I.

The foregoing positions were visible in the final MiFID I text. MiFID I introduced further harmonisation in terms of pre-trade transparency obligations compared to the ISD. A higher level of pre-trade data publication was intended through MiFID I. Minimum harmonization enabled Member States to subject RMs and MTFs to stricter pre-trade transparency obligations than prescribed by MiFID I.6

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Steil argued that the ISD transparency requirements were ‘so vague as to be virtually meaningless, and it is important to recognize that the FESE (Federation of European Stock Exchanges) does not have any formal regulatory enforcement role’ (B. Steil, The European Equity Markets: The State of the Union and an Agenda for the Millennium, ECMI, 1996, p. 127).

Commission, Communication from the Commission to the European Parliament and the Council - Upgrading the investment services directive (93/22/EEC), 15 November 2000(COM/2000/0729), p. 17.

Commission, MiFID I Proposal, 19 October 2002(COM(2002) 625 final); European Parliament, MiFID I Proposal Report, 4 September 2003(A5-0287/2003) and Council, MiFID I Common Position, 8 December 2003(2004/C 60 E/01).

The introduction of delegated regulations was made possible thanks to the so-called ‘Lamfalussy-process’. The Lamfalussy process was developed in 2001 to improve the development of financial law in the EU. The Lamfalussy procedure is composed out of four ‘levels’, each focusing on a specific stage of the implementation of the law. At Level 1 the European Parliament and Council adopt a directive or regulation in co-decision which contains framework principles and which empowers the Commission acting at Level 2 to adopt delegated acts or implementing acts. In the preparation of the Level 2 acts the Commission will consult with experts appointed by Member States within the European Securities Committee. At request of the Commission, ESMA (previously CESR) can advise the Commission on the technical details to be included in Level 2 legislation. At Level 3, ESMA also works on recommendations and guidelines and compares regulatory practice by way of peer review to ensure consistent implementation of Level 1 and Level 2. Finally, the Commission checks Member States’ compliance with EU legislation and may take legal action against non-compliant Member States (D. Busch, ‘Who’s Afraid of MiFID II?: An Introduction’ in D. Busch and G. Ferrarini (Eds.), Regulation of the EU Financial Markets: MiFID II & MiFIR, Oxford University Press, 2017, p. 4).

Council, MiFID I Common Position, 8 December 2003(2004/C 60 E/01), p. 51. Although the Council’s comments were made in the context of post-trade transparency, the comments are applicable in the context of the MiFID I pre-trade transparency as well.

Art. 45(1) and art. 30(1) MiFID I Directive. In the context of investment firms trading outside RMs and MTFs, see art. 28(1) MiFID I Directive.