Joint Response to ESMA Non-Equity Transparency Consultation Paper

On June 14, MFA and AIMA submitted a response to the European Securities and Markets Authority (“ESMA”) regarding its Consultation Paper: MiFID II/ MiFIR review report on the transparency regime for non-equity instruments and the trading obligation for derivatives (“the CP”). In the detailed responses to the questions raised in the CP, the Associations make the following points:

  •  The Associations agree with ESMA that the MiFID II post-trade transparency framework for non-equities has yet to deliver meaningful transparency and is in urgent need of revision, in part to pave the way for a potential post-trade consolidated tape in Europe, which would be of significant benefit to European financial markets. Accordingly, the Associations suggest that:
    • Deferral periods should be significantly shortened
    • The dissemination of the notional amount of large-size trades should be capped
    • The publication of post-trade price data on an aggregated basis across multiple transactions should be removed
    • Deferrals should be harmonised across member states
    • OTC derivatives transactions involving a firm that is an SI in the relevant sub-asset class should be subject to post-trade transparency.
  • MFA and AIMA endorse ESMA’s plan to follow up, in close cooperation with competent authorities, on the compliance of trading venues and APAs with the obligation to provide market data free of charge 15 minutes after publication.
  • Post-trade name give-up by MTFs and OTFs should be prohibited. EU market participants must be able to access all venues that list instruments subject to the DTO. Post-trade name give-up effectively prevents buy-side market participants from accessing specific venues, and the practice does not comply with the non-discriminatory access requirements in MiFID II. There is no legitimate justification for the continued use of the practice for centrally cleared instruments.
  • Separately, the Associations believe that ESMA should look more holistically at the MiFID II obligations in respect of trade and transaction reporting and the already significant reporting burden that falls on buy-side firms. A key way of addressing this problem would be to move to a reporting model where the sell-side is the primary reporting party for both post-trade and transaction reporting, given that sell-side firms typically have the scale necessary to be able to carry the costs associated with reporting.
  • MFA and AIMA would be concerned about any move to adjust the pre-trade large-in-scale waiver for commodity derivatives, which the Associations believe has worked well.