On 17 February 2020, the European Commission (Commission) launched its long-awaited public consultation on the review of MiFID II and MiFIR. The consultation paper is divided into two main sections: Section 1 covering general questions on the overall functioning of the MiFID II and MiFIR regulatory framework (Qs 1 – 6.1) and Section 2 covering specific questions on the existing regulatory framework (Qs 7 – 93). Section 3 includes one “catch-all” question where the Commission asks stakeholders to identify any additional issues not addressed in other sections of the consultation and which would “merit further consideration in the context of the review of MiFID II/MiFIR framework”. Notably, part one of Section 2 lists priority areas for review and includes:
- The establishment of an EU consolidated tape (Qs 7 – 30.1)
Under this sub-section, the Commission seeks stakeholder views on the current state of play, i.e. the absence of consolidated tape (CT) under the MiFID II / MiFIR framework. This includes reasons why a CT has not emerged, availability and price or market data and use cases for CT. Under the same sub-section the Commission has set out detailed questions considering general features of the CT, its scope and other issues under the MiFID II / MiFIR regime with a link to the CT.
- Investor protection (Qs 31 – 57.1)
Acknowledging that the ambitious Capital Markets Union (CMU) project attempts to improve the funding of the EU economy and foster retail investments into capital markets, the Commission seeks stakeholders’ views on issues including easier access to simple and transparent products, relevance and accessibility of adequate information, client profiling and classification, as well as product oversight, governance and inducements, distance communication and reporting on best execution.
- Research unbundling rules and SME research coverage (Qs 58 – 68.1)
Noting that the rules governing unbundling of research were designed to ensure that the cost of research funded by clients is not linked to, among others, the volume or value of other services, the Commission asks for stakeholders’ overall assessment of the effect of unbundling on the quantity, quality and pricing of research. The Commission also asks for stakeholder views on increasing the production of research on SMEs, including alternative ways of its financing and ways to promote access to such research.
- Commodity markets (Qs 69 – 76.1)
The final priority area for the review includes MiFID II provisions on position limits for commodity derivatives and pre-trade transparency regime for commodity derivatives. In particular, this includes consideration of the functioning of position limits regime for illiquid and nascent commodity markets, as well as potential changes to the scope of the position limits regime. The Commission also seeks stakeholder views on the functioning of pre-trade transparency regime for commodity derivatives markets, examples of identified shortcomings and prospective solutions.
In addition, part two of Section 2 covers areas identified as non-priority for review and includes:
- Derivatives trading obligation (Qs 77 – 80.1)
- Multilateral systems (Qs 81 – 81.1)
- Double volume cap (Qs 82 – 82.1)
- Non-discriminatory access (Qs 83 – 85)
- Digitisation and new technologies (Qs 86 – 91.1)
- Foreign exchange (Qs 92 – 93)
The consultation runs until 20 April 2020. It takes place in parallel with ESMA’s public consultation on several other issues pertaining to MiFID II and MiFIR, and including the consultation on the review report on the transparency regime on equity and equity-like instruments, the double volume cap mechanism and the trading obligation for shares, the consultation on the MiFIR report on systematic internalisers, and the consultation on draft technical standards on the provision of investment services and activities in the EU by third-country firms under MiFID II and MiFIR. Feedback to all of the consultation documents will feed into the Commission’s work on the preparation of prospective legislative amendments to MiFID II and MiFIR over the coming months.