On 3 February 2020, the European Securities and Markets Authority (ESMA) published a consultation paper on the MiFIR pre-trade transparency regime for systematic internalisers (SI) in respect of non-equity instruments.
Article 18 of MiFIR sets out specific pre-trade transparency requirements for SIs relating to bonds, structured finance products, emission allowances and derivatives. ESMA is required under Article 19(1) of MiFIR to monitor the application of these pre-trade transparency obligations. The monitoring focuses on the sizes at which quotes are made available to clients of the investment firm and to other market participants relative to other trading activities of the firm, and the degree to which the quotes reflect prevailing market conditions. Based on this monitoring, ESMA is required to submit a report to the European Commission by 3 July 2020.
Section 3 of the consultation paper explains the legal framework and presents an overview of European SIs. It also provides an assessment of the effectiveness of the SI regime on liquid and illiquid instruments and exposes preliminary recommendations to address possible inefficiencies. Section 4 provides the outcome of the quantitative monitoring of sizes at which quotes are made available to clients and other market participants. The Annexes include a summary of the questions, the legal mandate and further information regarding the data used to perform the monitoring.
The deadline for comments on the consultation paper is 18 March 2020. ESMA expects to publish a final report and submit it to the European Commission by July 2020.