MiFID review: CESR consults on equity markets
13 April 2010
CESR’s consultation focuses on definition of obligations for systematic internalisers, improvement in the quality and timeliness of post-trade transparency regime, application of transparency obligations to equity-like instruments and cost of market data.
The main topics addressed in this Consultation Paper are covered by the following headings:
· Pre-trade transparency regime for RM/MTFs: Data from the fact-finding shows that more then 90 percent of trading on organised markets in Europe is pre-trade transparent. CESR recommends retaining the general requirement for pre-trade transparency on organised markets (RM/MTFs). However, exceptions to pre-trade transparency should continue to be allowed under certain circumstances. In order to provide greater clarity for regulators and market participants and facilitate continuous supervisory convergence, CESR seeks to move from a principle based approach‘ to waivers from pre-trade transparency to an approach that is more rule based‘. As regards the scope and criteria for the waivers, CESR consults in Section 2.1.1 of the Consultation Paper on whether some of the waivers should be recast (i.e. thresholds for, and scope of, large in scale waiver, introduction of a minimum order size for the reference price waiver) and provides further clarifications on the interpretation of the waivers (Annex I).
· Definition of and obligations for systematic internalisers: The recommendation of CESR in Section 2.1.2 of the Consultation Paper is to retain the systematic internaliser regime but revisit the definition of systematic internaliser‘(SI) and related obligations to ensure a consistent understanding and implementation and to improve the value of information provided to the market.
· Post-trade transparency regime: A key theme in this Consultation Paper is the recommendation of CESR for an improvement in the quality and timeliness of post-trade transparency and the ability to effectively consolidate information received from multiple European equity markets. It is therefore recommended in Section 2.2 to retain the current framework for post-trade transparency, but introduce formal measures to improve quality, shorten delays and reduce the complexity of the regime. More specifically, it is proposed to amend MiFID to embed additional standards for the publication of post-trade information (Annex II) and to provide further clarifications of the post-trade transparency obligations (Annex III). To finalise the proposed standards for post-trade transparency information and to further specify proposed amendments to improve the quality of OTC post-trade transparency data by July 2010, CESR suggests establishing a joint CESR/Industry Working Group immediately following the publication of this Consultation Paper.
· Application of transparency obligations to equity-like instruments: CESR also recommends in Section 3 of the Consultation Paper to enhance the scope of transparency regime by applying transparency obligations to equity-like instruments admitted to trading on a RM, including depository receipts, exchange-traded funds, exchange-traded commodities and certificates‘. These instruments are considered to be equity-like, since they are traded like shares and, from an economic point of view, equivalent to shares. CESR believes that there are benefits for investors stemming from a harmonised pan-European pre-and post-trade transparency regime for these instruments.
· Regulatory framework for consolidation and cost of market data: CESR recognises that significant barriers to the consolidation of post-trade data remain and that without further regulatory intervention, market forces are unlikely to deliver an adequate and affordable pan-European consolidation of transparency information. Two possible approaches to achieve this goal are proposed for consultation in Section 4. One approach would retain the commercially-driven consolidation process but supplement the introduction of new standards to improve data quality and achieve greater consistency in trade publication practices by requiring investment firms to publish their trades through Approved Publication Arrangements (APAs). All APAs would be required to operate data publication arrangements to prescribed standards (Annex IV). The other approach would built on this APA regime but would require a single consolidated tape to offer market users a single point of access.
· Regulatory boundaries and requirements: In Section 5 of the Consultation Paper, CESR addresses concerns about certain inconsistencies which may have impacted the level playing field. It is proposed to align the requirements which apply to RM and MTFs under MiFID, and to introduce tailored additional obligations for investment firm operating crossing systems/processes. CESR also consults on the possibility of requiring investment firms operating crossing systems/processes to set up MTFs for their crossing activity once they have reached a certain size on its own or in combination with other crossing systems/processes with which they have a private link.
· MiFID options and discretions: In section 6 of the Consultation Paper some options and discretions relating to MiFID market provisions are identified and CESR consults on the desirability of eliminating certain options and discretions.
Deadline for comments 31 May 2010
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