The report addresses themes like improvement of transparency, ensuring fair competition among trading venues and identification of technological developments in markets.
For the review of the Markets in Financial Instruments Directive (MiFID), which will assess the directive's impact on the development and organisation of European equity markets, the AMF Board set up a working group chaired by Jean-Pierre Pinatton and Olivier Poupart-Lafarge in December 2009. The group, composed of all stakeholders, has now published its findings, which will contribute to ongoing discussions at domestic and European levels.
The report addresses three main themes:
- Improving transparency
· Pre-trade transparency: the report outlines several proposals, which include keeping pre-trade transparency waivers based on order size, as well as the requirements for negotiated transactions, which existed pre-MiFID, while clarifying the scope. Concerning the so-called reference price waiver, which allows a multilateral trading facility (MTF) to operate as a dark pool if the transactions it executes are based on a price imported from another trading system, the report recommends regulating these arrangements by setting a maximum trading volume beyond which the MTF is no longer eligible for the waiver.
· Post-trade transparency: the group supports mandatory introduction of a consolidated tape system in Europe. It also recommends that trades executed on crossing networks and by systematic internalisers should be identified by a generic identifier and that, more generally, transactions not subject to pre-trade transparency requirements should be identified when made public. Another recommendation is to reduce trade publication delays, notably by cutting the maximum delay from 3 minutes to 60 seconds, and to shorten the deferral periods currently authorised for some types of transactions. The group acknowledges the need to harmonise trade flags on trading venues throughout Europe. And it stresses the importance of clarifying the notion of over-the-counter (OTC) trading, which at present is defined solely by default, and determining a suitable way of regulating OTC trades, notably by flagging them.
- Ensuring fair competition among trading venues. The report recommends establishing a special legal status for crossing networks and setting a market share limit above which they would have to adopt MTF status. This would address concerns about absence of pre-trade transparency and privatisation of liquidity. The report also advocates strengthening the requirements that now apply to MTFs, particularly with regard to market organisation and surveillance, bringing them into line with those applicable to regulated markets.
- Identifying technological developments in markets: the report looks at high frequency trading, colocation, sponsored market access, fee structures and indications of interest, and recommends that the future European Securities and Markets Authority (ESMA) be given broad regulatory powers.
© AMF - Autorité des Marchés Financiers
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