ESMA revised opinions on third-country trading venues for post-trade transparency and position limits

Published: 19 December 2017


On 15 December, European Securities and Markets Authority (ESMA) issued updated Opinions on trade reporting and position limits under MiFID2/MiFIR.

On trade reporting, ESMA considers that bilateral transactions with non-EU firms, or on third country venues that are not subject to sufficient post-trade transparency, should be made public in the EU through an APA under MiFIR. ESMA nonetheless recognises that duplicating transparency would not contribute to the objectives of MiFIR and could in fact present misleading information. ESMA, therefore, will identify trading venues subject to ‘similar’ post trade transparency requirements, thus not requiring duplicate trade reporting by EU investment firms, within an annex to the Opinion.

These venues must meet four criteria: a) the venue operates a multilateral system; b) it is subject to authorisation in the third country; c) it is subject to supervision and enforcement by the third-country authority in accordance with the IOSCO Multilateral Memorandum of Understanding (MMoU); and d) has a post-trade transparency regime that ensures that transactions concluded on a trading venue are published as soon as possible after the transaction was executed or, in clearly defined situations, after a deferral period.

ESMA confirms that investment firms can consider transactions on third-country venues as not being subject to trade reporting until an assessment of the third-country venue against the above criteria has been made.

Regarding position limits, the ESMA opinion confirms that commodity derivatives contracts traded on a third-country venue should not be deemed to be OTC, thus should fall outside the scope of economically equivalence OTC contracts to be included within MiFIDII position limits calculations. Nonetheless, ESMA also notes that positions on third-country venues that meet certain criteria will fall within the MiFID II position limits regime as full venue traded contracts and be included within the calculation of an EU limit. This is when the venue: a) operates a multilateral system; b) is subject to authorisation in accordance with the legal and supervisory framework of the third-country; and c) is subject to supervision and enforcement under the MMoU.

As for trade reporting, a list of venues will be published in an annex to the Opinion and updated periodically. Until the assessments have been completed, ESMA confirms that firms should not consider trading on third country venues to be economically equivalent OTC.

If members have any questions, please contact Adam Jacobs-Dean, Oliver Robinson or Adele Rentsch.