MiFID II - Transparency requirements

  • Pre and post trade transparency requirements.
 

Open Access is at the core of our whole philosophy; because it puts customers first.

Pre and post trade transparency

MiFID II will introduce significant changes to the pre- and post-trade transparency regime for EU financial markets. LSEG is continuing to work on enhancements to current market models as well as seeking feedback from market participants on which pre-trade transparency requirements will best suit the functioning of each of its markets.

Waivers for equity and equity-like instruments

Competent Authorities can waive the obligation for trading venues to make pre trade information public for:

  • Reference Price Waiver (RPW)
    Systems matching orders based on the midpoint within the current bid and offer process of the trading venue where that financial instrument was first admitted to trading or the most relevant market in terms of liquidity.
  • Negotiated Trade Waiver (NTW)
    Systems that formalise negotiated transactions.
  • Large in Scale (LIS)
    Orders that are large in scale compared with normal market size.
  • Order Management Facility (OMF)
    Orders held in an order management facility of the trading venue pending disclosure.

Both RPW and NTW regimes are subject to the double volume cap mechanism (DVC).

LSEG trading venues will review existing waivers and apply for new waiver use cases as relevant.

Double Volume Cap Mechanism (DVC) for equity and equity-like instruments

Trading under the Reference Price Waiver and Negotiated Transaction Waiver for liquid securities will be restricted as follows:

  • the percentage of trading in a financial instrument carried out on a trading venue under those waivers shall be limited to 4% of the total volume of trading in that financial instrument on all trading venues across the EU over the previous 12 months.
  • overall EU trading in a financial instrument carried out under those waivers shall be limited to 8% of the total volume of trading in that financial instrument on all trading venues across the EU over the previous 12 months.

The DVC does not apply to negotiated transactions in securities for which there is not a liquid market, or to negotiated transactions that are subject to conditions other than the current market price.

When the percentage of trading in a financial instrument carried out on a trading venue under the waivers has exceeded the 4% limit, the competent authority for that venue shall within two working days suspend their use on that venue in that financial instrument for a period of six months.

When the percentage of trading in a financial instrument carried out on all trading venues across the EU under those waivers has exceeded the 8% limit, all Competent Authority shall within two working days suspend the use of those waivers across the EU for a period of six months.

ESMA will start monitoring relevant trading on 3 January 2017.

LSEG Trading Venues will develop functionality and operations to adapt to the DVC mechanism.

Waivers for Non-Equity Instruments

The new non-equity instrument transparency regime also allows for waivers. A Competent Authority can waive the obligation for trading venues to make pre trade information public for the following:

  • Large in Scale (LIS)
    Orders that are large in scale compared with normal market size.
  • Size Specific to Instrument (SSTI)
    Actionable indications of interest in request-for-quote and voice trading systems that are above a size specific to the financial instrument, which would expose liquidity providers to undue risk and takes into account whether the relevant market participants are retail or wholesale investors.
  • Order Management Facility (OMF)
    Orders in an order management facility of a trading venue pending disclosure as per art. 4 RTS 2 (including iceberg orders).
  • Derivatives
    Which are not subject to the trading obligation specified in Article 28 and other financial instruments for which there is no liquid market.
  • Order for the purpose of executing an exchange for physical;
    Package orders - that meet one of the following conditions:
    - at least one of its components is a financial instrument for which there is not a liquid market, unless there is a liquid market for the package order as a whole;
    - at least one of its components is large in scale compared with the normal market size, unless there is a liquid market for the package order as a whole;
    - at least one of its components is executed on a request-for-quote or voice system and is above the size specific to the instrument

Trade reporting

MiFID II will introduce the regulatory obligation for firms to report all their OTC trades across a wide range of financial instruments within a specific timeframe. This will help regulators obtain a more transparent view of a firm’s trading activities. London Stock Exchange has partnered with Boat Services to create TRADEcho, a single, multi-asset, pan-European reporting solution. The service will facilitate efficient pre and post trade reporting in an increasingly complex regulatory landscape.

Borsa Italiana will continue to maintain their PTTS service alongside TRADEcho.

For more information, visit: www.TRADEcho.com

Transaction reporting - For investment firms

Transaction reporting obligations will be extended to include a far broader range of equity like and non-equity instruments. The Group is exploring the best way of providing a full transaction reporting service for investments firms.

Transaction reporting by trading venues in relation to trades executed by Non MiFID member firms

Under MiFID II there is a requirement for trading venues to report transactions traded on their platforms by non-MiFID member firms (including Non EEA regulated investment firms or EEA asset management firms which are not covered by MiFID). LSEG is exploring technical solutions to collect all of the necessary information from these non-MiFID participants that are required to provide full transaction reporting by the trading venue to the relevant Competent Authority.

UnaVista

Through UnaVista, London Stock Exchange Group offers an Approved Reporting Mechanism (ARM), which can help firms fulfil all of their regulatory obligations. UnaVista will connect to all of Europe’s 31 National Competent Authorities as required, ensuring firms can report all relevant transactions across all markets and asset classes.

UnaVista is Europe’s leading MiFID transaction reporting ARM, helping firms report over 1.5 billion transactions annually. UnaVista also has a number of services to help firms prepare for MiFIR transaction reporting. Once MiFIR goes live our suite of services will help firms not just comply with reporting but give them the tools to improve their business processes as a result.

For more information visit UnaVista ; www.lseg.com/markets-products-and-services/post-trade-services/unavista/unavista-solutions/unavista-mifir-and-mifid

Data

LSEG will continue to provide real time, unbundled pre and post trade data on a reasonable commercial basis.

LSEG already provides the mandatory commercial disaggregation of pre and post trade data. In addition to this, we are proposing to offer new disaggregated products that we believe will add value for our customers and which we will encourage our vendors to mirror from January 2018.

Any further disaggregation will be handled on a demand basis.

  • Direct Customers
    Customers who take their data directly from London Stock Exchange Group can fully disaggregate their existing feed and we will provide suitable tariff and reporting mechanisms, provided appropriate technical controls are in place.
  • Vendor Connected Customers
    Customers who take their data via a vendor should benefit from our Day 1 disaggregation, which we will encourage vendors to mirror. Should a vendor see demand and wish to offer further/full disaggregation, we will provide suitable tariff and reporting mechanisms, provided appropriate technical controls are in place.

Further products can be added and priced in line with customer / vendor demand.

LSEG’s trading venues will also provide delayed data free of charge as required by MiFIR.