ESMA publishes update on MiFID waivers from pre-trade transparency

08 August 2012

ESMA published a revision of its waiver document which provides information on the pre-trade transparency of trading systems already set up in the European Union, and informs on the compliance of such systems with MiFID, the Markets in Financial Instruments Directive.

Pre-trade transparency waivers are an integral feature of MiFID.  However, in order to ensure the liquidity and efficiency of equity markets, waivers allow in a limited number of cases to deviate from MiFID’s trade transparency requirements.  ESMA compiles its waiver document in order to contribute to a level playing field across the Union when it comes to the consistent application of such waivers.

MiFID allows competent authorities to grant four types of waivers which are contained in Articles 18 and 20 of MiFID Implementing Regulation. Possible waivers apply to:

• Reference price systems: Systems where the price is determined by reference to a price gener-ated by another system and the reference price is widely published and regarded generally by mar-ket participants as a reliable reference price.
• Negotiated trade systems: Systems that formalise negotiated transactions, provided the trans-action:
  • takes place at or within the current volume-weighted spread reflected on the order book or the quotes of market makers in that share or, where the share is not traded continuously, within a percentage of a suitable reference price set in advance by the operator of the RM or MTF; or
  • is subject to conditions other than the current market price of the share (e.g. a volume weighted average price transaction).
• Order management facilities: Orders that are held in an order management facility main-tained by a RM or MTF pending those orders being disclosed to the market.
• Large-in-scale transactions: An order shall be considered to be large in scale compared with normal market size if it is equal to or larger than the minimum size of order specified in Table 2 in Annex II of the MiFID Implementing Regulation.

Full document

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