On 21 May 2024, the European Securities and Markets Authority (ESMA) published a consultation paper on the review and development of a package of regualtory technical standards (RTS) under the recently revised Markets in Financial Instruments Regulation (MiFIR). For a comprehensive overview of the recent changes introduced to the MiFIR framework please see our article.

The consultation paper focuses on the following:

  • Pre- and post-trade transparency requirements for non-equity instruments (bonds, structured finance products and emissions and allowances):
  • The consultation paper includes amendments to Commission Delegated Regulation (EU) 2017/583 (RTS 2) focusing on bonds, structured finance products (SFPs) and emission allowances (EUAs).
  • ESMA will publish a separate consultation paper on the new scope of the transparency regime for over-the-counter (OTC) derivatives in due course.
  • In the current consultation paper, ESMA addresses three main topics:
  • pre-trade transparency issues, and in particular the definition of trading systems and the pre-trade transparency waiver regime
  • the post-trade transparency deferral for bonds, structured finance products (SFPs) and EUAs
  • other issues, including the temporary suspension of transparency obligations and how to apply the exemption applicable to the European System of Central Banks (ESCB) in the transitional period before developing the corresponding RTS
  • Accordingly, the draft RTS 2 includes, among other changes, a proposed ESMA definition of “central limit order book”. It also sets out proposed new thresholds for the large-in-scale (LIS) waiver for bonds, SFPs and EUAs. ESMA also proposes changes to post-trade transparency fields, suggesting to harmonise the names of columns in post-trade transparency reports published by trading venues and approved publication arrangements (APAs), and introducing certain post-trade field specific changes.
  • In respect of the post-trade changes, ESMA sets out proposals on what constitutes a liquid and illiquid market for bonds, what constitutes a transaction of medium, large and very large size in a liquid and illiquid class of bonds, and what should the applicable deferral duration for each of the five categories. It also covers the specification for which SFPs or EUAs traded on a trading venue, or classes thereof, a liquid market exists, as well as the arrangements for deferred publication in respect of SFPs and EUAs.
  • Finally, ESMA also sets out its approach in relation to pre and post-trade transparency for exchange traded commodities (ETCs) and exchange traded notes (ETNs), proposing to move away from a periodic assessment of liquidity and introducing a static determination for ETCs and ETNs. In respect of the ESCB exemption, ESMA advises that it will develop the relevant RTS as part of its work on pre- and post-trade transparency mandate for derivatives.

Obligation to make pre-and post-trade data available on reasonable commercial basis (RCB):

Following the MiFIR mandate that ESMA’s guidelines on market data should be converted to legal obligations, ESMA proposes a new RTS that specifies:

  • what constitutes unbiased and fair contractual terms
  • what constitutes non-discriminatory access to data
  • the uniform content, format and terminology of the data policies to be made public
  • the data access, content and format of the information to be provided
  • elements to be included in the calculation of cost and margin by data providers
  • the uniform content, format and terminology of the information to be provided to the competent authorities
  • Overall, ESMA proposes a more granular approach to setting of the RCB boundaries than the one currently existing. This includes a more prescriptive approach towards the calculation of market data fees based on costs and suggest that such costs should reflect five main categories of a market data provider’s expenditure, namely: the infrastructure, the connectivity, the personnel, financial costs and other administrative costs. On the other hand, ESMA proposes to set the measures on which market data providers calculate “reasonable margin” as part of market data fees, on a principle-based basis.
  • Noting the currently unregulated area of redistribution of market data, ESMA calls on the European Commission (Commission) to create a level playing field between market data providers that are subject to MiFIR and non-regulated entities redistributing market data whist outside the scope of the legislation. In respect of non-discriminatory access, ESMA provides a draft list of obligations and prohibitions for the content market data agreements and asks respondents whether they can identify any other terms and conditions in market data agreements that could be perceived as biased or unfair.
  • In relation to content, format and terminology of the market data policies, ESMA proposes to convert its current guidelines by amending and streamlining it; it also seeks views on its proposed publication template and standard terminology and definitions, and whether respondents think that any additional information should be disclosed.

Obligation to provide instrument reference data:

  • The consultation paper proposes amendments to Commission Delegated Regulation (EU) 2017/585 (RTS 23) in order to reflect the relevant changes introduced to MiFIR, including that reference data reported should be used also for the purposes of transparency requirements, in addition to transaction reporting.
  • As such, ESMA proposes amendments to RTS 23 adapting reference data for the use of transparency requirements, including the reporting frequency, additional data elements to be reported, new OTC derivative identifier, date by which reference data are to be reported, alignment with the reporting requirements under the European Markets Infrastructure Regulation (EMIR) and Securities Financing Transactions Regulation (SFTR) and with the international standards, as well as adapting reference data for the use for publications under the Central Securities Depositories Regulation (CSDR) and reporting by a newly created category of designated publishing entities.

The deadline for comments on the consultation paper is 28 August 2024. Respondents are to provide comments to ESMA by using the response form provided.

ESMA plans to submit a final report to the Commission in December 2024.

ESMA is expected to publish additional consultation papers on MiFIR’s technical standards over the coming weeks.