In a success for the industry, many aspects of the final rules align with AIMA’s advocacy – in particular, the framework for EU consolidated tapes for market data; best execution reporting requirements; and the identification of SIs for trade reporting purposes.

• Consolidated Tapes

The development of an EU consolidated tape - a continuous electronic live data stream providing a comprehensive view of the prices and volume of certain financial instruments traded through the EU across trading venues – formed a fundamental part of the Review and interinstitutional negotiations. While MiFIR had provided a legislative framework for prospective providers of a consolidated tape, to date no tape has emerged.

To tackle this, the MiFIR Review introduces measures to encourage supervised entities to apply for authorisation to act as a consolidated tape provider (CTP). These include imposing a requirement on all trading venues and Approved Publication Arrangements (APAs) to transmit harmonised market data directly to CTPs as close to real-time as technically possible; mandating the inclusion of post-trade and pre-trade data in a CT for shares and ETFs, with the pre-trade tape displaying the European Best Bid and Offer with corresponding volumes and without venue attribution; removing the requirement for CTPs to make trade reports available free of charge after 15 minutes; allowing consumption of data published by the CT to be discretionary, not mandatory, by market participants; and empowering the European Securities and Markets Authority (ESMA) to periodically organise a competitive selection procedure to select a single CTP per asset class - bonds, shares and ETFs and OTC derivatives - for a specified period.

ESMA will initiate the first selection procedure for a CTP for bonds on 3 January 2025; for a CTP for shares and ETFs in June 2025; and for a derivatives CTP by 29 December 2025. ESMA plans on making a decision on the selected applicant for the bonds CTP by early July 2025 and for the CTP for shares and ETFs by December 2025. Once selected and authorised, the CTP will ave the right to operate for 5 years. 

• Best Execution Reporting

In its original proposal for a directive amending MiFID II, the European Commission called for the deletion of the obligation for execution venues to produce execution quality reports consistent to the format prescribed under RTS 27. The final rules also delete the RTS 28 best execution reporting requirements set out under Article 27(6) of MiFID II, alleviating unnecessary costs for firms. 

Note: In February 2024, ESMA adopted and published a statement announcing the de-prioritisation of supervisory actions on the obligation to publish RTS 28 reports, given the timing issue arising from the deletion of the reporting obligation from the MiFID II Review Level 1 text and its transposition into national law.

• SI Identification

The European Commission’s proposal for a regulation amending MiFIR included proposals to improve the operation of the SI regime, such as requiring SIs to make public firm quotes on the basis of a minimum quote size. The final rules also address complexities in the identification of investment firms as systematic internalisers for the purpose of reporting trades to an APA.

The Review replaces the pre-trade transparency obligations under the SI regime with the introduction of a status of ‘designated publishing entity’. This allows an investment firm to make a transaction public through an APA without needing to opt in to the status of an SI; requires NCAs to (i) grant investment firms the status of a designated publishing entity for individual classes of financial instruments and (ii) communicate such status requests of firms to ESMA; and requires ESMA to maintain a public register of designated publishing entities by class of financial instruments. ESMA will establish the register by 29 September 2024.

• Other (non-exhaustive)

1.  Requiring the European Commission to assess, by 29 March 2025, the possibility of extending the scope of Article 26 MiFIR transaction reporting requirements to include alternative investment fund management (AIFM) firms and units of collective investment undertakings management companies (UCITS ManCos) with MiFID ‘top-up’ permissions.
2. Mandating ESMA to draft RTS specifying the content of trading venues, Approved Publication Arrangements, consolidated tape providers and systematic internalisers obligation to provide market data on a 'reasonable commercial basis'
3. Requiring market data providers to (i) include ‘unbiased and fair contractual terms’ within the concept of making market data available to the public on a reasonable commercial basis; (ii) ensure non-discriminatory access to the relevant information; (iii) make relevant market data policies available to the public free of charge and in a manner which is easy to access and to understand; (iv) make data available free of charge 15 minutes after publication in a format that is machine-readable and usable for all users, including retail investors (this requirement is for APAs and SIs only - CTPs are allowed to charge users for delayed data); and (v) follow a set of transparency requirements towards National Competent Authorities (NCAs) related to the cost of producing and disseminating data and the margin applied to data provision
4. Establishing a separate pre- and post-trade transaprency regime for derivatives
5. Creating a new post-trade deferral regime for bonds and derivatives which removes national discretion, setting out in the Level 1 test the maximum durations that ESMA shall apply for establishing the price and volume deferrals for transactions related to non-equity financial instruments and requiring ESMA to recalibrate the applicable deferral durations regularly with the aim of decreasing it where appropriate
6. Limiting the pre-transparency obligations for market operators and investment firms operating trading venues to publish firm or indicative quotes in bonds, structured finance products and emission allowances only when operating central limit order books and periodic auction trading systems (excludes voice trading and request-for-quote trading systems)
7.  Replacing the double volume cap (4% and 8%) with a single volume cap (7%) for trades executed under the reference price waiver or the negotiated trade waiver
8.  Deleting the condition to the application of the Share Trading Obligation that the shares be admitted to trading on a regulated market or traded on an EU trading venue, deleting the exception from the share trading obligation for trades that are non-systematic, ad-hoc, irregular and infrequent and adding a new exception for trades in shares executed on a non-EU venue in the local currency
9.  Aligning the scope of financial counterparties subject to the derivatives trading obligation with the scope of financial counterparties subject to the derivatives clearing obligation under the European Market Infrastructure Regulation (EMIR), as amended by the 2019 EMIR Refit regulation
10. Extending position management controls to trading venues which trade derivatives on emission allowances, amending the scope of position reporting by excluding emission allowances (spot) and introducing a new obligation to report two weekly positions reports, of which one excludes options
11.  Creating a new identifier for OTC derivatives
12. Providing that reference data reported pursuant to Article 27 MiFIR should be used for the purposes of transparency requirements (in addition to existing transaction reporting purposes)
13. A full ban on PFOF with the introduction of a grandfathering regime for Member States where PFOF is currently allowed, to end on 30 June 2026

The MiFIR/MiFIR Review changes present the following practical implications:

1. Updates to reporting processes
2. Need to coordinate with sell-side counterparties to understand how changes will impact on execution of strategies and on responsibility for post-trade reporting. Firms that wish to register as a desginated publishing entity will need to submit a request to National Competent Authroities 
3. Changes to arrangements for deferred post-trade reporting of bonds, derivatives, structured finance products and emissional allowances and supplementary deferrals for sovereign bonds
4. Need to integrate consolidated tape data into trading and operation processes (not mandatory)

AIMA has categorised the MiFIR/MiFID II Review generally as High Priority/High Impact and it is therefore often represented in bright orange in the AIMA Regulatory Horizon Scan gantt chart.  However, individual implementaing measures may be assigned different levels of priority or impact and will therefore be represnted in different colors in the AIMA Regulatory Horizon Scan gantt chart.

Key Dates

¹    Following the provisional political agreement that was reached on 29 June 2023, technical discussions on the MiFIR Review and MiFID II Review texts continued and, in October 2023, agreements were reached. The final texts of the Regulation amending MiFIR and the Directive amending MiFID II were published in the Official Journal of the EU on 8 March 2024.

²   The Regulation amending MiFIR and the Directive amending MiFID II takes effect 20 days after publication in the Official Journal of the EU.

³    The Regulation amending MiFIR is binding in its entirety and directly applicable in all Member States.

⁴    Deadline for ESMA to establish and update regularly a register of all designated publishing entities, specifying their identity and the classes of financial instrument for which they are designated publishing entities. ESMA will publish the register on its website. 

⁵    The MiFIR Review mandates the European Commission, with ESMA, to assess whether or not to extend transaction reporting requirements under Article 26 MiFIR to AIFMs and UCITS ManCos with MiFID 'top-up' permissions by 29 March 2025. The European Commission is empowered to adopt delegated acts to effect this extension. 

⁶   Member States will have 18 months after the Directive amending MiFID II takes effect to bring into force the laws, regulations and administrative provisions necessary to comply with the Directive.

The amendments introduced to the Level 1 texts include a number of Level 2 measures that are to be developed during the implementation period. “Implementing Measures” include (i) regulatory technical standards, (ii) implementing technical standards (which may be developed by ESMA to be adopted by the European Commission, including by delegated acts in accordance with the Treaty on the Functioning of the European Union, and (iii) guidelines developed by ESMA, in each case where expressly mandated in the Level 1 texts. The date of entry into application of the Level 2 measures is subject to their adoption by the European Commission and approval by the European Parliament and the Council of the EU. The technical standards will be published in the Official Journal of the EU and be binding in their entirety and directly applicable in all Member States. Where needed, they will also provide for an implementation period.

A list of ESMA and the European Commission's published Level 2 consultations are provided below.

ESMA Consultation Packages 1 and 2 [closed]

• *New* Regulatory Technical Standards and Implementing Technical Standard relating to consolidated tape providers (CTPs) and other data reporting service providers
• *Amended*  Regulatory Technical Standard 2 on Non-Equity Transparency
• *New* Regulatory Technical Standards on Reasonable Commercial Basis
• *Amended*  Technical Standards and Advice relating to commodity derivatives
• *Amended*  Regulatory Technical Standard 23 on Financial Instruments Reference Data

ESMA Consultation Package 3 [closed]

• *Amended*  Regulatory Technical Standard and Technical Advice on the liquidity assessment for equity instruments and on equity transparency
• *New* Implementing Technical Standard (ITS) on the content and format of the systematic internaliser (SI) notification
• *Amended* RTS 3 on the volume cap
• *Recast* RTS 7a on organisational requirements of trading venues, adding new provisions on circuit breakers and with targeted amendments to adapt to the DORA framework
• *New* RTS on input and output data for shares and ETFs consolidated tape provider (CTP)
• *Amended* RTS 2 on flags for post-trade transparency reports for non-equity instruments
• *New* RTS on the criteria for establishing and assessing the effectiveness of investment firms’ order execution policies

ESMA Consultation Package 4 [open]

• *Amended* RTS 22 on transaction data reporting under Article 26
• *Amended* RTS 24 on order book data to be maintained under Article 25 of MiFIR. 
• *Amended* RTS 2 non-equity transparency for derivatives (to be published in Q4 2024)

***

A summary of all pending implementation measures is provided below. 

• AIMA Position on the European Commission MiFIR/MiFID II Review Proposal (February 2022)
• AIMA Proposed Technical Amendments to MiFIR and MiFID II (March 2022)
• AIMA Position on European Parliament Rapporteur Transaction Reporting Amendments (October 2022)
• AIMA Position on European Parliament Amendments to the MiFIR/MiFID II Review Proposals (November 2022)
• AIMA Position Paper on European Parliament Amendments to the MiFIR/MiFID II Review Proposals (January 2023)
• AIMA Position on Council of EU General Approach on the MiFIR/MiFID II Review Proposals (February 2023)
• AIMA Position on MiFIR/MiFID II Review Trilogue Negotiations (April 2023)
• AIMA Position Summary on MiFIR/MiFID II Review Technical Standards - ESMA Consultation Packages 1 and 2 (September 2024)