On 1 March 2023, the European Parliament Economic and Monetary Affairs (ECON) Committee adopted its negotiating position on the review of the Markets in Financial Instruments Regulation (MiFIR).
The following aspects of the ECON Committee negotiating position have been contentious points through the negotiation and have been amended in comparison to the European Commission proposal:
- Payment-for-order-flow (PFOF): The ECON report makes the proposed full ban on PFOF subject to a number of exemptions. The adopted text states that the PFOF ban does not apply to fees, commissions or non-monetary benefits related to the forwarding of professional clients’ orders for execution, where permitted under the approved and public tariff structure of a regulated market or multilateral trading facility (MTF).
- Consolidated tape: One of the most contentious issues in the MiFIR review are changes to the consolidated tape provider (CTP) regime. Pointing to risks for market participants stemming from a need to navigate across fragmented markets and attempting to fix the deficiencies of the current regime, the European Commission (Commission) proposed to facilitate the emergence of one CTP for each asset class. The CTPs would be selected by the European Securities and Markets Authority (ESMA). The ECON report prescribes a separate selection procedure for CTPs for each asset class. The CTPs would be appointed through a step-by-step approach, starting for bonds, followed by shares/exchange traded funds and derivatives.
- Position limit regime: The ECON Committee votes to add a new provision requiring ESMA to review the position limit and position management controls regimes by 31 December 2025. Following the review, the Commission could file a legislative proposal amending the regime. Specifically, the report must assess the appropriateness of the limitation of the scope of position limits to agricultural commodity derivatives and critical or significant commodity derivatives that are traded on trading venues, and to economically equivalent over-the-counter (OTC) contracts.
- Circuit breakers: The ECON report wouldallow Member States to require a regulated market to be able to temporarily halt or constrain trading in the event of an emergency situation or a significant price movement in a financial instrument on that market. In exceptional circumstances, Member States could even require a regulated market to be able to cancel, vary or correct a transaction. Regulated markets would have to publicly disclose on their websites the conditions under which they would take such actions.
In terms of process, the European Parliament plenary is expected to vote on the ECON report later this month. Following the plenary vote, the ECON Committee can engage in so-called trilogue negotiations with the Council and the Commission to reach a common compromise on the MiFIR review proposal. Trilogue negotiations will likely start in April 2023. The Council adopted its negotiating position in December 2022.