With less than 220 days until MiFID II comes into force, ESMA has clarified transparency for instruments traded on non-EU trading venues and updated its Q&A documents to address the practical questions on the implementation of MiFID II.
TRADEcho's regulatory team has put together the below summary of the key points from the recent ESMA updates, with a focus on the pre and post-trade transparency obligations under MiFID II. If any areas are unclear please contact the TRADEcho regulatory team.
Investment firms are responsible for the timely publication of any transaction and the correct application of any deferral.
Firms must ensure that any deferral is communicated to the APA, and retain full responsibility for its accuracy.
Firms should submit trade reports to the APA as soon as technically possible.
3rd country issues – ESMA will provide a list of third-country trading venues where firms will not be required to make public trades via an APA. Firms trading on third-country venues not on the list will be required to make trades public via an APA.
The SI quoting obligation in non-equities can be met by SI's who quote their instruments on their Single Dealer Platforms on a continuous basis (e.g. Request for Stream). This will primarily be applicable for liquid instruments traded on electronic markets (e.g. FX forward/swaps derivative instruments).
While it is stated that the price quoted by the SI has to be firm there is still some ambiguity: "The Systematic Internaliser can, in justified cases, execute orders at a better price than the streaming quote". According to ESMA these are still firm quotes - they are just not the touch price.
There is a need for further clarity regarding the question 'For how long should quotes provided by Systematic Internalisers be firm or executable?', given that there are different interpretations in the market of what constitutes a “reasonable period of time”.
The long awaited anonymity of SI Quoting for non-equity has been clarified. SI Quotes will, under MiFID II, be required to be named.
SIs should use the same means and arrangements when publishing firm quotes in non-equity instruments as for equity instruments. This is specified in Article 13 of the Commission Delegated Regulation (EU) No2017/567 including time-stamping.
TRADEcho can validate any deferral indication, or perform that determination on behalf of the firm if requested. TRADEcho's APA will provide the market with a clear and concise tape of a firm's trades. Trades will be published across all asset classes in line with the regulatory reporting time frames, helping firms meet their MiFIR/MiFID II post-trade transparency obligations.
TRADEcho's SI Quoting service publishes SI Quotes, in a machine and human readable format via the LSE market data service (GTP) or on the TRADEcho website. A large number of Market Data Vendors subscribe to the market data and make it available to their clients. Clients can also subscribe to the data directly. TRADEcho assesses quote eligibility and only those that meet the regulatory criteria are published. This can be overridden.
Additionally, TRADEcho's SI Determination service provides firms with the tools to determine if they qualify as a SI. TRADEcho collates the total traded in every MiFID II instrument across the European Union and keeps firms informed of their SI status in real time.
TRADEcho is the London Stock Exchange Group’s real-time pre and post-trade publication service for MiFID II formed in direct response to client feedback for compliant, simplified and cost effective reporting services. Together with UnaVista: firms can enjoy seamless trade and transaction reporting in one experience; helping ease the regulatory burden for financial firms.
TRADEcho’s services cover all MiFID II asset classes and provide firms with the tools to meet their pre and post-trade transparency obligations, this includes SI Determination, SI Quoting, Smart Report Routing and Trade Publication (APA).