ESMA reviews the transparency regime for non-equity instruments for MiFIR

Europe’s market regulator, the European Securities and Markets Authority (ESMA) has launched a Consultation Paper in review of the transparency regime for non-equity instruments and the trading obligation for derivatives under the Market in Financial Instruments Regulation (MiFIR).

In this Paper, ESMA makes proposals for possible amendments to the transparency regime based on data analyses of the effects of the current regime since January 2018.

With this review, ESMA aims to simplify the current complex trade reporting regime and to create uniform set of rules in the European Union, as well as to improve the overall trade transparency available to market participants for non-equity instruments.

The following main developments since 2018 were revealed in the analysis:

  • There seems to be a low level of pre-trade transparency , likely affected by the high share of financial instruments benefitting from a waiver.
  • The post-trade transparency deferral options appear to hamper attaining the objective of improving the functioning of the EU internal market.

The paper also contains ESMA’s report on the impact of the newly introduced obligation for derivatives and the progress in moving trading in standardised OTC derivatives to exchanges or electronic trading platforms.
ESMA also decided to include the Level 2 review of the transparency regime in CDR (EU) 2017/583 (RTS 2). RTS 2 is the implementing measure that specifies how pre- and post-trade transparency apply to different asset classes across the Union.

ESMA also proposes gradual increase in the transparency for bongs. The agency is consulting on some targeted improvements for commodity derivatives in particular.

All stakeholders involved in EU securities are asked to respond to the consultation by 19 April 2020. ESMA will submit its final review report on the transparency regime for non-equity instruments to the European Commission in July 2020.

The consultation is a part of more extensive review of MiFIR and complements a Consultation Paper published on 4 February 2020 on the transparency regime for equity and equity-like instruments.

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