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Extension of the transparency regime: New financial instruments and trading venues

MiFID II-MiFIR involves the extension of regulatory obligations relating to pre-trading and post-trading transparency to new financial instruments and also to new trading venues other than regulated markets, such as MTFs, OTFs (the new category of trading venue created by MiFID II-MiFIR), and systematic internalisers.

As a new feature, MiFIR introduces the obligation to publish OTC transactions. IFs trading in this way shall fulfil this obligation through specific data reporting services providers, in particular through Authorised Publishing Agents (APAs).

Transparency regime applicable to shares and similar instruments

In addition to the shares already included in the transparency regime since MiFID I, the transparency regime will also apply to financial instruments treated as equity (such as ETFs).

Pre-trading transparency

  • Scope of the obligation. Bid and offer prices, as well as the depth of trading interests, shall be made public. This obligation shall be calibrated for the different trading venues and the actionable indications of interest shall also be made public.
  • Pre-trade transparency waivers and limitations on those waivers.
    • Procedure for authorisation: MiFID II-MIFIR recognises the possibility for trading venues to apply to the competent authority for waivers from the general pre-trade transparency obligation in the event of certain circumstances provided for in the regulations. The new legislation provides that prior to the authorisation of the implementation of a waiver by the competent authority, ESMA will issue a non-binding opinion on the compatibility of the waiver with the legislation.
    • Types of pre-trade transparency waivers: the types of waivers that may be granted include the following:
      • Waivers for systems that match orders to referenced prices.
      • Waivers for systems that formalise negotiated transactions.
      • Waivers for orders that are large in scale.
      • Waivers on orders pending disclosure introduced through an order management facility.
    • Mechanism for restricting the volume of trading benefiting from the waivers (Double Volume Cap): the new regulatory framework introduces a double limitation on the use of certain waivers, depending on the volume of trading of the financial instrument, in the trading venue itself (4%) and at European level (8%). In particular, this mechanism concerns those waivers granted to trading venues that operate with referenced prices and those that allow the formalisation of certain types of negotiated transactions.

Post-trade transparency. Authorisation for deferred publication

  • Scope of the obligation. The price, volume and time of execution of the transactions executed shall be made public as soon as technically posible.
  • Authorisation for deferred publication. MiFID II-MiFIR allows the possibility for the competent authorities to authorise in their jurisdiction the deferral of the publication of the transaction details depending on the liquidity of the instrument, the size of the transaction and when it has taken place.

Transparency regime applicable to instruments other than shares and similar instruments

The pre-trade transparency obligation will cover bonds and debentures, securitisations, emission allowances and derivatives.

Pre-trade transparency

  • Scope of the obligation. Bid and offer prices as well as the depth of trading interests shall be made public. This obligation shall be calibrated for the different trading venues and the actionable indications of interest shall also be made public.
  • Pre-trade transparency waivers:
    • Procedure for authorisation: MiFID II-MIFIR recognises the possibility for trading venues to apply to the competent authority for waivers from the general pre-trade transparency obligation in the event of certain circumstances provided for in the regulations. The new legislation provides that prior to the authorisation of the implementation of a waiver by the competent authority, ESMA will issue a non-binding opinion on the compatibility of the waiver with the legislation.
    • Types of pre-trade transparency waivers: the types of waivers that may be granted include the following:
      • Waivers for large-in-scale orders or pending disclosure in order management systems;
      • Waivers for actionable indications of interest in request for quote (RFQ) or live voice trading systems where a specified volume is exceeded, and
      • Waivers for instruments that do not have a liquid market.

Post-trade transparency. Authorisation for deferred publication

  • Scope of the obligation. The post-trade transparency obligation requires the price, volume and time of execution of the transactions to be made public as soon as technically possible, with a maximum delay of 15 minutes (5 minutes as from 2021).
  • Authorisation for deferred publication. MiFID II-MiFIR allows the possibility for the competent authorities in their jurisdiction to authorise deferral of the publication of the data in the following types of transactions:
    • Large-in-scale transactions for the instrument or category of instrument concerned;
    • Transactions related to a financial instrument or category of financial instruments for which there is no liquid market; or
    • Transactions whose size exceeds a specific size for the instrument in question, exposing liquidity providers to undue risk.
Likewise, the competent authorities may accompany the authorisation for deferred publication of transactions with other measures, such as authorising the publication of transactions in an aggregated form for an indefinite period in the case of sovereign debt or allowing an extended deferral period for other financial instruments.

Access on a reasonable commercial basis to information on the transparency regime

Access to the information required by the transparency regime is one of the fundamental pillars of the new regulation. MiFID II-MiFIR reinforces the disclosure of information on reasonable commercial basis, through the imposition of certain obligations, based on the transparency and proportionality of the price of information services with respect to production costs, which mainly aim to provide the user with the possibility of comparing these services with other similar ones. In addition, the new legislation provides for the disaggregation of the information packages relating to pre- and post-trading, as well as with a higher level of detail. Free access to information within 15 minutes of publication is introduced as a new feature.

Communications from CNMV on the transparency regime