On 4 February 2020, the European Securities and Markets Authority (ESMA) published a consultation paper on the transparency regime for equity and equity-like instruments, the double volume cap (DVC) mechanism and the trading obligation for shares under MiFIR.

Article 52 of MiFIR requires ESMA to submit a report on the impact in practice of the transparency obligations under Articles 3 to 13 of MiFIR and the impact of the DVC mechanism under Article 5 of MiFIR. ESMA has decided on its own initiative to also include an assessment of other key transparency provisions and, in particular, the share trading obligation (Article 23 of MiFIR) and the transparency provisions applicable to systematic internalisers (SIs) (Articles 14 to 21 of MiFIR).

The key proposals in the consultation paper include:

• pre-trade transparency and waivers. ESMA proposes to address the ongoing high volume of dark trading by either reducing the number of waivers available to market participants or to make the use of waivers subject to stricter requirements;
• the DVC mechanism. ESMA is proposing to simplify the DVC regime and to apply it in a wider and stricter way to further curb dark trading;
• the SI regime. ESMA proposes an increase of minimum quoting obligations subject to pre-trade transparency, a revised methodology for determining quoting sizes and/or an extension of the SI obligations to illiquid instruments; and
• the trading obligation for shares. ESMA is proposing to clarify the scope of the trading obligation specifically in relation to third-country shares. In particular, the possible overlap with the trading obligation of a third country became particularly apparent in the context Brexit and is further discussed in paragraphs 266 to 269 of the consultation paper. On this issue ESMA believes that a better calibrated scope of application of the MiFIR trading obligation to only EU shares would alleviate concerns to a very large extent. ESMA is therefore asking firms if the share trading obligation in Article 23 of MiFIR should be reduced to exclude third-country shares and if so, what is the best way to identify such shares.

The deadline for comments on the consultation paper is 17 March 2020. ESMA intends to submit its final report of the transparency regime applicable to equity instruments to the European Commission by July 2020.

ESMA expects to publish a consultation paper analysing the transparency regime applicable to non-equity instruments in the next few weeks.