[ N E W S
“While we consider that MiFIR has been
partially successful, we also see some significant
remaining challenges which should be tackled by
a targeted review of the legislation.”
STEVEN MAIJOOR, CHAIR, ESMA
DVCs encompass all negotiated
trades across illiquid instruments,
and questioned what other sys-
tems the regulator could use in
place of the DVCs.
Generally, market participants
have criticised the move by
regulators in Europe to curb dark
trading, which allows for mini-
mal market impact and in some
cases can provide the best price
for clients. Some have argued the
volume caps are arbitrary and not
based on concrete analysis, while
others have previously described
the DVCs as a political
compromise.
The restrictions on dark trading
have led to a proliferation of
periodic auction and block trading
venues in Europe. Following huge
debate in the industry, ESMA has
stated that periodic auctions have
been used to avoid the DVCs and
proposed an appropriate transpar-
ency regime be implemented for
the venues.
ESMA has also proposed in the
consultation that rather than
removing the reference price and
negotiated trade waivers, it could
allow trading under the waivers
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for orders above certain sizes.
However, the regulator cautioned
that if more trading moves to ref-
erence price facilities then price
determination could be weakened.
The review from ESMA has also
targeted one of the more contro-
versial consequences of MiFID II;
the systematic internaliser (SI).
The SI regime requires invest-
ment firms to assess whether they
are SIs for various assets on a
quarterly basis, based on data from
the prior six months of activity. If
firms exceed thresholds from the
calculations, they are considered
an SI under MiFID II and have to
fulfil SI obligations.
SIs could see some far-reaching
changes from the review of MiFID
II, with ESMA going so far as to
outright ask market participants
if they think the execution venues
should be banned under the share
trading obligation (STO). Con-
cerns have long-been voiced that
activity traded on SIs is not trans-
parent enough, and the re-emer-
gence of SIs under MiFID II has
caused fragmentation.
Market participants have been
asked to submit responses to the
consultation, before ESMA sends
its final review of the transparency
regime for equity instruments to
the European Commission by July
this year.
“While we consider that MiFIR
has been partially successful, we
also see some significant remain-
ing challenges which should
be tackled by a targeted review
of the legislation,” said Steven
Maijoor, ESMA chair, about the
consultation. “We believe that the
proposals presented today will
allow for a recalibration of MiFIR,
reducing its complexity, while
improving transparency to the
benefit of investor protection and
orderly and stable markets in the
European Union.”
Issue 63 // thetradenews.com // 15