When I posted in early February, there hadn't been a great deal of attention on the impact of "no deal" Brexit on the MiFIR share trading obligation. That is certainly no longer the case as the area has become a hot topic in the media and with regulators.

ESMA has published a statement on the impact of Brexit on the share trading obligation, with the intention of clarifying the position for EEA investment firms and banks.

We've updated our briefing to reflect this and have summarised the key points below.

ESMA did not suggest that UK venues be deemed equivalent. Instead, ESMA confirmed that post-Brexit, EEA firms cannot assume that all shares admitted to trading on a UK venue are outside the scope of the share trading obligation.

The approach ESMA is taking (which it will revisit within 12 months), is as follows:

  • all shares with an EU27 ISIN (and shares with an ISIN from Iceland, Liechtenstein and Norway) are subject to the share trading obligation;
  • shares with a GB ISIN are considered to be traded on a “non-systematic, ad hoc, irregular and infrequent” basis in the EU27 and thus not subject to the share trading obligation, unless those shares qualify as liquid in the EU27. ESMA has published a list of those liquid shares;
  • shares with a non-EU27 and non-GB ISIN shares are to be determined on the basis of the previous guidance.

Alongside its statement, ESMA published a list of shares that qualify as liquid based on trading in the EU27, which included 14 shares with GB ISINs. EEA investment firms and credit institutions will be required to trade shares in those 14 companies on an EU27 venue, even if the UK is the home listing.

The FCA responded very quickly to ESMA's statement, noting that if it took the same approach to the scope of the UK share trading obligation, this would have the potential to cause disruption to market participants and issuers of shares in terms of access to liquidity.

We look forward to further developments, including the approach that the UK will take to applying its own share trading obligation.

Considering the strong ties and interconnections between the UK and the EU27 financial markets, it cannot reasonably be assumed that all shares admitted to trading on a UK regulated market are traded on a non-systematic, ad-hoc, irregular and infrequent basis in the EU27 and are therefore out of the scope of the trading obligation. - ESMA