On February 18, the European Securities and Markets Authority (ESMA) published a new consultation paper (CP) on the implementation of the transparency provisions of the revised EU Market in Financial Instruments Directive (MiFID II) and the EU Market in Financial Instruments Regulation (MiFIR). ESMA had previously published another set of MiFID II/MiFIR consultation papers on December 19, 2014. However, the transparency-related sections of these papers did not address certain non-equity instruments. The CP is designed to fill this gap by providing ESMA’s transparency proposals for foreign exchange derivatives, credit derivatives, contracts for differences and “other” derivatives.
The CP provides two sets of analyses for each of the foregoing asset classes. First, the CP sets out ESMA’s analysis on the definition of liquid market for the relevant asset class, which is essential for market participants to determine whether, for example, a trade execution obligation applies to the financial instruments in that asset class. Second, the CP presents ESMA’s calculations on the “large-in-scale” as well as “size specific to the instrument” thresholds, which are used to determine whether a particular trade qualifies for a waiver from otherwise-applicable pre- and post-trade transparency requirements. In conducting its analyses, ESMA relied on data collected from trade repositories (TR) even though, as ESMA notes, certain “quality issues” remain in relation to the data reported to TRs. Nevertheless, ESMA announced that it was satisfied that such data was “sufficient to provide a general overview” of the trading activity for the relevant asset classes.
The CP also completes the transparency-related draft regulatory technical standards (RTS) from the consultation papers of December 2014, which included rules and tables for certain bonds, structured finance products, emissions allowances and derivatives not included in the current publication. The consultation period for the CP ends on March 20.
A copy of the CP can be found here.
ESMA’s press release accompanying the report can be found here.