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Latest issue - March 2020
Overview of the key regulatory changes impacting the financial services industry
- The ESMA consults on MiFIR transparency regime for non-equity instruments
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Highlights in this issue
The European Securities and Markets Authority (ESMA) consults on MiFIR transparency regime for non-equity instruments
On 10 March 2020, ESMA published a consultation paper on the MiFID II/MiFIR review report on the transparency regime for non-equity instruments and the trading obligation for derivatives. The publication is part of the broader review of MiFIR, and was preceded by a consultation paper on the transparency regime for equity and equity-like instruments, the double volume cap mechanism and the trading obligtions for shares published in February 2020.
The consultation paper contains ESMA’s proposals for possible amendments to the transparency regime based on in-depth data analyses of the effects of the current regime since January 2018. With this consultation, ESMA aims to simplify the current complex trade reporting regime in order to create a uniform set of rules in the European Union while trying to improve the overall trade transparency available to market participants for non-equity instruments.
With regards to the Level 1 provisions, ESMA’s data analyses revealed the following main developments since 2018 that:
- the overall level of pre-trade transparency appears to be limited due to the high share of financial instruments benefitting from a waiver; and
- the available deferral options for post-trade transparency appears detrimental to attaining the objective of improving the functioning of the EU internal market.
This consultation paper also includes ESMA’s report on the impact of the newly established trading obligation for derivatives and the progress made in moving trading in standardised over-the-counter (OTC) derivatives to exchanges or electronic trading platforms.
In addition to the Level 1 review, ESMA decided to also include the Level 2 review with regard to the transparency regime in the regulatory technical standards (RTS) 2. RTS 2 is the implementing measure specifying the technical rules of how pre- and post-trade transparency apply to different asset classes across the Union.
ESMA is proposing to move to the next stage in terms of gradually increasing the transparency for bonds. In addition, ESMA is consulting on some targeted improvements specifically for commodity derivatives.
The consultation will run until 19 April 2020, with ESMA intending to submit its final review report of the transparency regime applicable to non-equity instruments to the European Commission in July 2020.
Furthermore in this issue
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Regulatory Radar series
Regulatory Radar is a publication series focusing on regulation for the financial services industry. Each issue provides an update on the latest highlights in the financial services industry, followed by an overview of normative, consultative and informative documents issued for the financial services industry, credit institutions and investment firms, investment products and asset management, insurance, reinsurance and pensions.