19 May 2020

European Commission consultation on MiFID 2 Refit: EBF Key recommendations

The EBF welcomes the European Commission consultation on MiFID Refit. The EBF believes it is appropriate to take targeted amendments of the investor protection and market structure rules, in particular in the context of the Covid- 19 recovery where financial markets should work in an efficient way.

This is also in line with the Markets4Europe Campaign calling for more integrated Financial Markets in the EU which the EBF is coordinating.

The EBF would like then to highlight the following points:

• The EBF welcomes a review of the information requirements in MiFID 2 since we find the current regime too complex and not calibrated to clients’ needs. However, EBF does not think that the creation of a new semiprofessional client category is the best solution to this problem. EBF members would rather support deleting information obligation towards professional clients and eligible counterparties. We also support a review of the opt-up criteria in order to facilitate for experienced retail clients to be treated as professional clients.
• The EBF supports simplifying of product governance rules and alleviating information (notably on costs and charges). EBF also proposes to narrow down the scope of target market requirements to exclude simple products such as shares and bonds.
• The EBF does not support the development of such EU database of investment products, as (i) it would entail high costs for manufacturers in order to provide the relevant administrator with the necessary and up to date information KIDs/KIIDs/prospectuses or other documents/information and any updated version and (ii) it would have limited value for clients in particular regarding costs.
• The EBF understands that the Best Execution reports (RTS 27 and 28) in their current form have not delivered the intended policy objective, i.e. to provide clients and investment firms with data which can be used for evaluating best execution. Before taking any further steps, the European Commission should carry out a cost-benefit analysis of RTS 27 and 28 and engage with market participants to determine whether these RTS continue being fit for purpose.
• The EBF members have diverging views on the need for an EU Consolidated Tape. If the European Commission decides to introduce a CT, we would support robust governance to be put in place but not mandatory consumption of any data. The EBF is particularly attentive to the risk of increased market data cost. The EBF would also suggest to take a phase-in approach and to start with post-trade equity data first. Because of the lack of consistency, derivatives cannot be in the scope. The EBF is committed to continue reflecting on this topic and to contribute to the debate as long as the discussion evolves.
• The Share Trading Obligation should as a minimum be recalibrated in particular in case of dual listing of shares. However, for the sake of competition, EBF members believe that it is important that SIs remain an eligible venue for the STO. Furthermore, we consider the Derivatives Trading Obligation deserves to be moved to the EC priority areas because the market is in urgent need for the alignment of DTO and the Clearing Obligation in terms of scope of application for financial instruments and counterparties.
• The EBF assessment of the effect of unbundling is negative: the reduction in the price of research has led to a considerable fall in the research coverage.

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