Conscious of the international audience here today, I believe that MiFID II should be of interest for non-EU trading venues, or third-country trading venues in EU jargon, because of MiFID II’s impact outside the EU. MiFID II has already started triggering changes in EU market structure and the development of new trading modalities, and some of these changes may also be taken up outside Europe. Furthermore, other regulators will monitor developments under MiFID II and might be interested in the impact some of its more novel provisions may have.
MiFID II introduces an ambitious pre- and post-trade transparency regime applicable to all equity and non-equity instruments. This is a major change compared to MiFID I which only applied pre- and post-trade transparency to equities. Concerning pre-trade transparency, MiFID II requires trading venues and so-called systematic internalisers – i.e. firms that trade on their own account with clients on a systematic and substantial basis – to make public quotes in instruments they are trading. On post-trade transparency, transactions, regardless of whether they are executed on trading venues or OTC, have to be published in real-time. Finally, MiFID II introduces a trading obligation for shares, requiring investment firms to conclude transactions in shares either on an EU venue, an EU systematic internaliser, or a third-country trading venue following an equivalence decision of the European Commission.
The current legislative framework of EMIR does not allow ESMA to recognise CCPs based in the UK as third-country CCPs as long as it is an EU Member State. This legal obstacle results in a situation where EU Clearing Members, and EU trading venues, are uncertain about the continued access to EMIR-recognised CCPs. To respond to those risks to the stability of EU financial markets, in my view we need to ensure continued access to UK CCPs for EU clearing members and trading venues. Such continued access is in line with the EMIR 2.2 proposal which allows, under certain conditions, systemically important CCPs (Tier 2 CCPs) and non-systematically important CCPs (Tier 1 CCPs) from third countries to provide services in the Union.
So, I would support a swift conclusion of the EMIR 2.2 legislative file, complemented by a transitional provision allowing for the continued access to UK-based CCPs, subject to conditions ensuring that UK CCPs continue to comply with EMIR requirements and colleges continue to monitor this compliance.
A final comment that I would like to make is not only relevant for trading and central clearing, but generally for supervision and enforcement in securities markets. In the case of a no deal Brexit, NCAs and ESMA should have in place with our UK counterparts the type of MOUs that we have with a large number of third country regulators. These MOUs are essential to meet our regulatory objectives and allow information exchange for effective supervision and enforcement, for example for market abuse cases. ESMA has coordinated the preparations for such MOUs together with the EU27 NCAs. Taking the wider negotiations between the EU and UK into account, we plan to start negotiations with the UK FCA with the objective to have these MOUs in place sufficiently on time before the end of March 2019.
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