Executive Summary
In 2021, the European Commission published a 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 were 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 were relatively targeted and mainly related to the creation of consolidated tapes for market data in the EU. Other proposals included 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.
Following further discussions relating to changes to transaprency waivers and deferrals, the derivatives trading regime, the systematic internaliser regime, the deletion of RTS 28 best execution reporting requirements and the design of the consolidated tape for bonds. The final texts of the Regulation amending MiFIR and Directive amending MiFID II were approved by the Council of the EU and European Parliament and published in the Official Journal of the EU on 8 March 2024.
The new Regulation amending MiFIR and the new Directive amending MiFID II took effect on 28 March 2024. The MiFIR Review is binding in its entirety and directly applicable in all Member States. Members States have until 28 September 2025 to transpose the MiFID II 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
Key Amendments
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 by 29 December 2024; for a CTP for shares and ETFs by 29 May 2025; and for a derivatives CTP by 29 December 2025.
- 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)
- 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.
- 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'
- 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
- Establishing a separate pre- and post-trade transaprency regime for derivatives
- 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
- 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)
- 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
- 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
- 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
- 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
- Creating a new identifier for OTC derivatives
- 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)
- 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
Practical Implications
The MiFIR/MiFIR Review changes 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. Firms that wish to register as a desginated publishing entity will need to submit a request to National Competent Authroities
- Changes to arrangements for deferred post-trade reporting of bonds, derivatives, structured finance products and emissional allowances and supplementary deferrals for sovereign bonds
- Need to integrate consolidated tape data into trading and operation processes
Timeline
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
Due date for Implementing Measures under Art. 1: | 29 March 2026 |
Due date for Implementing Measures under Arts. 10, 25, and 33: | 29 September 2025 |
Trading in finanical instruments under the single volume cap to be monitored: | 28 September 2025 |
MiFID II Review Transposition Date:8 | 28 September 2025 |
Estimated entry into force of Delegated Act under Article 50:7 | 1 September 2025 |
Deadline for the European Commission and ESMA to assess an extension of Article 26 transaction reporting requirements:6 |
29 March 2025 |
Due date for Implementing Measures under Arts. 4, 7, 13, 14 and 46: | 29 March 2025 |
Due date for Implementing Measures under Arts. 11, 12, 22, 28 and 32:5 | 29 December 2024 |
ESMA deadine to publish register of designated publishing entities:4 | 29 September 2024 |
ESMA consultation on RTS on Order Execution Policies published: | 16 July 2024 |
ESMA consultation on RTS 1 on Equity Transparency published: | 10 July 2024 |
ESMA consultation on ITS on Systematic Internaliser Notifications published: | 10 July 2024 |
ESMA consultation on RTS 3 on the Volume Cap published: | 10 July 2024 |
ESMA consultation on RTS 7a on Trading Venue Organisational Requirements published: | 10 July 2024 |
ESMA consultation on RTS for CTP for Shares and ETFs published: | 10 July 2024 |
ESMA consultation on RTS 2 on Non-Equity Transparency (Post-trade flags) published: | 10 July 2024 |
ESMA consultation on RTS & ITS for CTPs published: | 23 May 2024 |
ESMA consultation on RTS & ITS for Commodity Derivatives published: | 23 May 2024 |
ESMA consultation on RTS 23 on Financial Instrument Reference Data published: | 21 May 2024 |
ESMA consultation on RTS on Reasonable Commercial Basis published: | 21 May 2024 |
ESMA consultation on RTS 2 on Non-Equity Transparency published: | 21 May 2024 |
Due date for Implementing Measures under Art. 26: | 29 June 2024 |
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 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 Deadline for ESMA to submit to the European Commission its draft new RTS and ITS relating to consolidated tape providers and other data reporting service providers; draft amended RTS 2 on non-equity transaprency; draft new RTS on Reasonable Commercial Basis; draft amended RTS Tehcnical Standards and Adivce relating to commodity derivatives; and draft amended RTS 23 on finanical instruments reference data. ESMA launched consultation on each in May 2024, with a deadline for feedback in August 2024.
6 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.
7 Under the MiFIR Review, all trading venues that offer trading in over-the-counter derivatives that are subject to pre-and post-trade transaprency requirements are obliged to provide ESMA with identifying reference data that are agreed globally for the purpose of public transprency reporting under MiFIR. The European Commission is required to adopt a delegated act within three months of the MiFIR Review's entry into force (by 29 June 2024) specifing the identifying reference data to be used with regard to OTC derivatives for the purposes of the transparency requirements, including a unique product identifier and any additional identifying reference data. The European Commission launched a targeted consultion in November 2023 seeking input on a replacement of the public identifier, to which AIMA responded. On 12 June 2024, the European Commission published a consultation paper on its draft Delegated Regulation regarding OTC derivatives identifying reference data under MiFIR. The draft Delegated Regulation sets out identifying reference data to be used with regard to OTC interest rate swaps and OTC credit default swaps for the purposes of the transaprency requirements under Article 8a(2) and Article 10 and 21 MiFIR. The consultation closes on 12 July 2024. The Delegated Regulation will enter into force 20 days after its publication in the Official Journal. It is proposed to apply from 1 September 2025.
8 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.
Pending Implementation Measures
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.
ESMA is currently consulting on a range of technical standards.
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In May 2024, ESMA published its first and second package of consultation papers on the Level 2 measures mandated by the European Commission under the MiFIR Review and MiFID II Review. ESMA is consulting on the below measures until 23-28 August 2024. It is mandated to publish Final Reports and submit the draft measures to the European Commission by 29 December 2024.
- *New* Regulatory Technical Standards and Implementing Technical Standard relating to consolidated tape providers (CTPs) and other data reporting service providers
Key aspects: The input and output data of CTPs; and the criteria to assess CTP applicants
- *Amended* Regulatory Technical Standard 2 on Non-Equity Transparency
Key aspects: The definition of central limit order books, periodic auction trading systems, package transactions and request for quote and voice trading systems; the pre-trade transparency waiver regime; and the calibration of post-trade deferrals for bonds, structured finance products and emission allowances and supplementary deferrals for sovereign bonds
- *New* Regulatory Technical Standards on Reasonable Commercial Basis
Key aspects: The elements to be included in data providers’ calculation of market data fees; what constitutes unbiased and fair contractual terms; and the content, format and terminology of market data policies
- *Amended* Technical Standards and Advice relating to commodity derivatives
Key aspects: Amendments necessary to cater for new MiFID II requirements relating to position management controls and the format of position reports by investment firms and market operators
- *Amended* Regulatory Technical Standard 23 on Financial Instruments Reference Data
Key aspects: Amendments necessary to cater for new MiFID II requirements relating to position management controls and the format of position reports by investment firms and market operators
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In July 2024, ESMA published its third package of consultation papers on the following:
- *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 is consulting on the measures until 15 September - 16 October 2024. A summary of the consultation package can be found here and here.
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In Q4 2024, ESMA plans to publish its fourth package of consultation papers. This will be on RTS 2 non-equity transparency for derivatives and on transaction reporting.
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A summary of all pending implementation measures is provided below.
MiFIR Review Article |
Description |
Due Date |
Article 26 |
European Commission adoption of delegated acts in accordance with Article 50 specifying the identifying reference data to be used with regard to OTC derivatives for the purposes of the transparency requirements laid down in Article 8a(2) and Articles 10 and 21 MiFIR |
29 June 2024 |
Aricle 11 | RTS specifying deferred publication in respect of bonds, structured finance products or emission allowances | 29 December 2024 |
Article 12 | RTS specifying the obligation to make pre-trade and post-trade data available on a reasonable commercial basis | 29 December 2024 |
Article 22 | RTS specifying the quality of data transmitted to consolidated tape providers (CTP), measures to address erroneous trade reporting and enforcement standards in relation to data quality, including arrangements regarding cooperation between data contributors and the CTP and, where necessary, the quality and the substance of the data for the operation of the consolidated tapes | 29 December 2024 |
Article 22 | RTS specifying the level of accuracy to which business clocks used for recording the date and time of reportable events are to be synchronised | 29 December 2024 |
Article 28 | RTS specifying the information to be provided by applicant CTPs to ESMA and the information to be included in the notifications as regards CTPs | 29 December 2024 |
Article 28 | ITS specifying the standard forms, templates and procedures for the information to be provided by applicant CTPs for authorisation | 29 December 2024 |
Article 32 | RTS specifying the weight assigned to each CTP revenue redistribution scheme crtierion, the method for calculating the amount of the revenue to be redistributed to data contributors, the criteria under which the CTP can suspend temporarily the participation of that data contributor in the revenue redistribution scheme and the conditions under which the CTP is to resume revenue redistribution and, where there was no breach of the CTP's requirements, provide that data contributor with the revenue retained plus interest | 29 December 2024 |
Article 4 | RTS specifying the method, including the flagging of transactions, by which it collates, calculates and publishes the transaction data, to provide an accurate measurement of the total volume of trading per financial instrument and the percentages of trading that use the waiver under the single voulme cap across the EU | 29 March 2025 |
Article 7 | RTS specifying waivers for bonds, structured finance products, emission allowances, derivatives and package orders | 29 March 2025 |
Article 13 | RTS specifying the minimum quote size of systematic internalisers | 29 March 2025 |
Article 14 | ITS specifying the content and format of the notification for systematic internalisers | 29 March 2025 |
Article 46 | European Commission assessment of the possibility of extending the transaction reporting requirements under Article 26 MiFIR to AIFMs as defined in Article 4(1), point (b), of Directive 2011/61/EU, and management companies, as defined in Article 2(1), point (b), of Directive 2009/65/EC, which provide investment services and activities and which execute transactions in financial instruments | 29 March 2025 |
Article 10 | RTS specifying deferred publication in respect of derivatives | 29 September 2025 |
Article 25 | RTS specifying finaical instruments reference data | 29 September 2025 |
Article 33 | RTS specifying the content, timing, format and terminology of the reporting obligation for CTPs to publish perfomance statistics and incident reports relating to data quality and data systems | 29 September 2025 |
Article 1 | RTS specifying the monetary, foreign exchange and financial stability policy operations and the types of transactions to which the exemption from transparency requirements will not apply with regard to members of the European System of Central Banks which are not members of the Eurosystem | 29 March 2026 |
Article 46 | ESMA report to the European Commission assessing the market demand for the consolidated tape for shares and ETFs, the impact of that consolidated tape on the functioning, attractiveness and international competitiveness of EU markets and firms, whether the consolidated tape has delivered on its aim to decrease information asymmetries between market participants and to make the EU a more attractive location to invest and the appropriateness of adding additional features to the consolidated tape, such as the dissemination of the market identifier code for pre-trade data | 30 June 2026 |
Article 4 |
ESMA report to the European Commission assessing the volume-cap threshold, taking into account financial stability, international best practices, the competitiveness of EU firms, the significance of the market impact and the efficiency of price formation |
29 September 2027 |
Article 25 |
ESMA report to the European Commission assessing the feasibility of more integration in transaction reporting and streamlining of data flows |
29 March 2028 |
Article 52 |
ESMA report to the European Commission assessing the appropriateness of the single volume cap set in Article 5(1) and the necessity to remove or to extend it to other trading systems or execution venues which derive their prices from a reference price, taking into account international best practices, the competitiveness of EU financial markets, and the effects of that volume cap on the fair and orderly trading on markets and on the efficiency of price formation |
29 March 2028 |
Article 52 |
European Commission report to the European Parliament and Council of the EU, after consulting ESMA, on the asset classes covered by a consolidated tape; the timeliness and the quality of the data transmitted to the CTP; the timeliness of the dissemination, and the quality, of the core market data and regulatory data; the role of core market data and regulatory data in reducing implementation shortfall; the number of users of the consolidated tape per asset class; the effect of core market data and regulatory data on remedying information asymmetries between various capital market participants; the appropriateness of the transmission protocols used for the transmission of data to the CTP; the appropriateness and functioning of the revenue redistribution scheme, in particular as regards data contributors that are small trading venues; and the effects of the core market data and regulatory data on investments in SMEs |
Three years after the first authorisation of a consolidated tape |
Article 27 |
ITS specifying the standard forms, templates and procedures for the information to be provided by applicant APAs or ARMs for authorisation |
No stated deadline |
Article 24 |
RTS specifying the details and formats of the order data that trading venue operators are required to maintain and keep at the disposal of the national competent authorities for atleast five years |
No stated deadline |
AIMA Resources
- 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 Summary of ESMA Consultation Paper on Amendments to RTS 2 on Non-Equity Transaprency (June 2024)
- AIMA Summary of ESMA Consultation Paper on RTS on Reasonable Commercial Basis (June 2024)
- AIMA Summary of ESMA Consultation Paper on RTS on Consolidated Tape Providers (June 2024)
- AIMA Summary of ESMA Consultation Paper on Tehcnical Standards on Commodity Derivatives (June 2024)
- AIMA Summary of ESMA Consultation Paper on Amendments to RTS 23 on Financial Instruments Reference Data (June 2024)