On 11 March 2022, there was published a letter from Verena Ross (Chair of the European Securities and Markets Authority (ESMA)) to the President of the Economic and Financial Affairs Council (Council of the EU) and the Chair of the Committee on Economic and Monetary Affairs (European Parliament). The letter shares ESMA’s technical comments on the European Commission’s review of the Markets in Financial Instruments Regulation (MiFIR), particularly on the consolidated tape provider (CTP), non-equity transparency, including the trading obligation for derivatives, data reporting and investor protection parts.
In terms of the proposals relating to CTPs, whilst the ESMA is strongly supportive of the main elements of the MiFIR review proposal creating the conditions conducive to the emergence of CTPs it does highlight a number of challenges in the letter. According to ESMA the main challenge relates to the timelines currently envisaged for the selection process (three months after entry into force of the Regulation to organise the selection process and a further three months to decide which entity to select and authorise). The ESMA believes that the timeline is unfeasible both for itself as well as potential CTP applicants. The ESMA also notes, among other things, that the Commission proposal includes a “fall-back clause” under which, if one year after entry into force of the Regulation no CT has emerged for any asset class, the Commission should review the framework and may set out whether the ESMA should operate the CT. The ESMA encourages co-legislators to further reflect on the proposed “fall-back clause” and the practical challenges for the ESMA operating a CT. In addition, the ESMA also draws attention to an inconsistency in the proposal between the scope of the derivatives CTP and the scope of the transparency requirements, which is likely to raise significant practical implementation issues.