ESMA recently announced consultations on MiFIR transaction reporting and reference data and the functioning of organised trading facilities (OTFs). These consultations form part of ESMA’s review obligations under MiFID II and will help the European Commission understand the impact of MiFID II on the market. ESMA has stated that it intends to publish its final review reports on these issues during the first quarter of 2021. These reports are likely to inform the ongoing discussions in relation to potential further changes to MiFID II.
The consultation paper sets out ESMA’s proposals to amend the MiFIR transaction reporting and reference data regimes. The consultation addresses a number of topics, including:
- the scope of the existing transaction reporting regime and reference data obligations, including proposals to potentially extend the scope of reporting (and potentially the ToTV – traded on a trading venue – concept) in response to the EU Benchmarks Regulation and further to ESMA’s recently published Final Report on the transparency regime for non-equity instruments and the trading obligation for derivatives (which contains further proposals in relation to those topics);
- the data elements that should be reported, with proposals in relation to whether certain new data elements should be included and whether each of the existing data elements should be maintained, removed, replaced or further clarified;
- the order transmission regime and the delegation of reporting obligations to ARMs;
- the interaction between the MiFIR reporting obligations and reporting obligations under EMIR, with proposals to ensure further alignment in light of EMIR Refit; and
- the use of the LEI of the issuer for reference data reporting purposes and related proposals.
ESMA has invited responses by 20 November 2020.
The consultation paper sets out proposals to clarify the MiFID II provisions relating to OTFs (and multilateral systems more broadly) to “ensure efficient EU market structures and a more level playing field between all firms operating in the EU while reducing the level of complexity for market participants.”
The consultation addresses a number of topics, including:
- a quantitative analysis of OTF trading (with a particular focus on OTF trading in bonds and derivatives), including changes in the volume of OTF trades since MiFID II was introduced;
- the definition of “organised trading facilities” (including the definition of “multilateral system”), the perimeter for requiring authorisation as a trading venue and the use of discretion by OTFs;
- possible amendments to the OTF regime aimed at reducing the regulatory burden and facilitating the operation of an OTF for less sophisticated brokers; and
- matched principal trading, including how OTFs have been making use of matched principal trading and potential clarifications to the MiFID II restrictions on dealing on own account.
ESMA has invited responses by 25 November 2020.
In addition to these consultations and as part of its ongoing MiFID II review work, ESMA is also expected to publish a consultation on algorithmic trading. ESMA also recently published its Final Report on draft rules for third-country firms under MiFID II and MiFIR.
Although it is not clear whether the UK will adopt the proposals being published by ESMA post-Brexit, ESMA’s work is nonetheless likely to be influential in shaping the future development of financial markets regulation.