For the most part, the framework is working as intended with provisions being appropriately calibrated. However, we believe that much-needed flexibility can be achieved by making targeted simplification and optimisation to the Level 2 framework and ESMA Q&As.
EFAMA has always been supportive of the overarching objectives of the MiFID II/MiFIR framework to enhance the efficiency, resilience, and integrity of financial markets, and ultimately improve their functioning. For the most part, the framework is working as intended with provisions being appropriately calibrated. However, we believe that much-needed flexibility can be achieved by making targeted simplification and optimisation to the Level 2 framework and ESMA Q&As.
Implementation of MiFID II and MiFIR represented a major challenge for the financial industry as a whole and for regulators. In particular, the publication of the Level 2 measures was delayed, resulting in less time for implementation, which significantly increased complexity and cost.
In general, ESMA’s current approach in the form of continuously updated Q&As is burdensome for the wider financial industry. Each new clarification can lead to necessary changes to underlying systems and be time- and resource-intensive. We would therefore strongly suggest making thematic Q&A updates every year, with enough time for the industry to implement these changes. The timing of such impending updates could also be announced in advance and would allow the involved parties to plan for these changes, thus cost-effectively adapting their systems in time.
Moreover, in accordance with the principles of good regulation and with the revised powers of the ESAs, the industry and other impacted stakeholders should be able to comment on the proposed answers to questions, before the answers are published as final. It is noted that the drafting of some Q&As is not clear or are worded in such a way that they are understandable in relation to a certain sector or product but not for others.
More specifically related to this consultation, we consider that the transparency, for pre- and post-trading, has improved and could be further improved.
However, we caution ESMA to keep in mind that transparency is not necessarily the only – nor the most important- factor to be taken into account in view of offering the best outcome for end investors (other criteria such as quality of the execution, cost or liquidity also play a significant role).
For the sake of transparency, MiFID II has forgotten to consider the role of institutional investors investing on behalf of end investors, allowing for economies of scale.
Therefore, we believe that the MiFID II/MiFIR framework would benefit from some targeted amendments and optimisations in the following areas:
- the pre-trade transparency regime for trading venues in respect of non-equity instruments,
- the post-trade transparency regime for trading venues and investment firms in respect of non-equity instruments,
- the trading obligation for derivatives (DTO), and
- the trade percentile for the determination of the pre-trade SSTI threshold.
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© EFAMA - European Fund and Asset Management Association
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