EU Regulatory Update

Author: Clerkin Lynch

Date Published 02/12/2021

ESMA publishes MiFID II/MiFIR Annual Review Report on RTS 2

ESMA published the MiFID II/MiFIR Annual Review Report under Commission Delegated Regulation (EU) 2017/583 (RTS 2) on 28th July 2021. In this ESMA has proposed to the European Commission to move to stage three of the phase-in for the transparency requirements, for both the average daily number of trades threshold used for the quarterly liquidity assessment of bonds, and for the pre-trade size specific to the instrument threshold for bonds but not to move to stage two for the pre-trade size specific to the instrument threshold for the other non-equity instruments. ESMA considers that the level of completeness and the quality of the data were still insufficient to perform the annual transparency calculations in 2020 for a number of instrument classes and therefore it was considered premature to move to the next stage.

The proposals to move to stage three are expected to improve the currently limited pre- and post-trade transparency available to market participants in the bond market.
This final report covers the mandate under Article 17 of RTS 2 whereby ESMA is required to analyse whether it is appropriate to move to the following stage of the phase-in for the transparency requirements with regards to (i) the average daily number of trades threshold used for the quarterly liquidity assessment of bonds, and (ii) the trade percentile used for determining the pre-trade size specific to the instrument thresholds for bonds and other non-equity instruments.

In light of the assessment undertaken and the conclusions reached, ESMA has prepared an amended version of the applicable regulatory technical standards as foreseen in RTS 2.
In order for the move to stage three to take effect, the European Commission has to endorse the amended regulatory technical standards. Following such endorsement, they are then subject to a non-objection procedure by the European Parliament and the Council.

ESMA on 28 July 2021 published the MiFID II/MiFIR Annual Review Report under Commission Delegated Regulation (EU) 2017/583 (RTS 2). ESMA proposes to the European Commission to move to stage three of the phase-in for the transparency requirements, for both the average daily number of trades threshold used for the quarterly liquidity assessment of bonds, and for the pre-trade size specific to the instrument threshold for bonds. It adapted this will entail additional filing requirements on market participants.