The European Securities and Markets Authority has commenced a consultation on proposed amendments to the provisions of the Markets in Financial Instruments package on the transparency regime for equity and equity-like instruments, the double volume cap mechanism and the trading obligation for shares. The consultation is part of the larger review on the implementation of the revised Markets in Financial Instruments Directive and the Markets in Financial Instruments Regulation. Feedback to the consultation will aid ESMA in preparing its report to the European Commission, which in turn is expected to report in 2020 to the European Parliament and Council of the European Union. ESMA's consultation closes on March 17, 2020. It intends to publish its final report to the Commission in July 2020. ESMA will be consulting separately on the transparency regime for non-equity instruments, such as bonds and derivatives.
ESMA's proposals for change, if accepted and adopted in due course, could affect both the primary legislation (MiFIR and MiFID) as well as the secondary legislation supplementing this (i.e. Technical Standards and Delegated Regulations). ESMA's proposals include:
- reducing the number of pre-transparency waivers available by removing, for example, the reference price and negotiated trade waivers for liquid and illiquid instruments. Alternatively, to make the use of waivers subject to stricter requirements by, for example, increasing the "Large in Scale" threshold for Exchange Traded Funds from €1,000,000 to €5,000,000;
- if the Double Volume Cap mechanism is maintained (i.e. the existing waivers are maintained), applying it in a wider and stricter way;
- revising the Systematic Internaliser regime to ensure a level playing field between Systematic Internalisers and trading venues. The proposals include an increase of minimum quoting obligations subject to pre-trade transparency, a revised methodology for determining quoting sizes and/or an extension of the Systematic Internaliser obligations to illiquid instruments; and
- excluding third-country shares from the share-trading obligation. ESMA highlights the major practical challenge of identifying the shares that would be classified as third-country shares.