Executive Summary
In 2021, the European Commission published its proposal for a regulation amending the Markets in Financial Instruments Regulation (MiFIR) and proposal for a directive amending the Markets in Financial Instruments Directive II (MiFID II) – the ‘MiFIR/MiFID II Review’. The proposals are part of the European Commission’s Capital Markets Union legislative package also amending the Alternative Investment Fund Managers Directive, the European Long-Term Investment Fund Regulation and introducing a European Single Access Point for public financial and sustainability-related data.
The European Commission’s proposed changes to MiFIR/MiFID II are relatively targeted and mainly relate to the creation of consolidated tapes for market data in the EU. Other proposals include amendments to the scope of the share trading obligation and derivatives trading obligation, the scope of the ‘double volume cap’ mechanism, operation of the systematic internaliser regime, best execution reporting requirements, the duration of post-trade deferral periods for non-equity instruments and a new ban on payment for order flow.
On 29 June 2023, the European Parliament and the Council of the EU reached a provisional political agreement in respect of the three main political issues under the MiFIR/MiFID II Review – inclusion of pre-trade data in a CT for shares and exchange-traded funds (ETFs); ban on Payment For Order Flow (PFOF); and provisions relating commodity derivatives. The co-legislators are expected to endorse the provisional agreement in Q3 2023. While the main political issues have been agreed upon through the political trilogue negotiations, work is still necessary on the technical level to finalise the Review.
Please contact Adam Jacobs-Dean or Aniqah Rao with any questions regarding these proposals.
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Adam Jacobs-Dean
Managing Director, Global Head of Markets, Governance and Innovation
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Aniqah Rao
Associate Director, Markets, Governance and Innovation
State of Play
As the end of Sweden’s term holding the presidency of the Council of the EU on 30 June 2023 drew near, the co-legislators succeeded in agreeing the following:
- Formation of an anonymised top-of-book pre-trade consolidated tape for shares and ETFs – that is, the inclusion of European Best Bid and Offer (EBBO) with corresponding volumes and without venue attribution. A review clause by 30 June 2026, in the form of a potential legislative proposal by the European Commission, is understood to be agreed on the pre-trade consolidated tape to assess venue attribution criteria and any additional data to be included.
- 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; and
- Provisions relating commodity derivatives, including dropping the European Parliament’s proposal to introduce minimum holding periods for commodity derivatives and endorsing the European Parliament’s amendments on requiring position management controls for emission allowance derivatives.
Finer details of the consolidated tape framework are to be seen, including the design of the consolidated tape for bonds, and technical discussions relating to changes to transparency waivers and deferrals, the derivatives trading regime and the systematic internaliser regime remain. We also await the outcome of discussions relating to other key areas of the Review such as:
- The deletion of the RTS 28 best execution requirement – an amendment that was proposed by the European Parliament and one that AIMA has long supported (and successfully advocated for its removal in the UK).
- The extension of the scope of 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 – also proposed by the European Parliament. AIMA is pushing back on this amendment.
Practical Implications
If the MiFIR/MiFIR Review changes are adopted as proposed, they will present the following practical implications:
- Updates to reporting processes.
- Need to coordinate with sell-side counterparties to understand how changes will impact on execution of strategies and on responsibility for post-trade reporting.
- Need to integrate consolidated tape data into trading and operation processes.
Timeline
AIMA has categorised the MiFIR/MiFID II Review proposal as High Priority/High Impact and it is therefore represented in bright orange in the AIMA Regulatory Horizon Scan gantt chart.
Key Dates
MiFID II Review Transposition Date:4 28 September 2025
MiFIR Review Implementation Date:3 28 March 2024
MiFIR and MiFID II Review Effective Date:2 28 March 2024
MiFIR and MiFID II Review OJ Publication Date:1 8 March 2024
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 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.
AIMA Position Papers
- 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)