ESMA has written to the European Commission to postpone the review of MiFID II Regulatory Technical Standards (RTS) 2, which was due in July 2019, as outlined in Article 17 of the RTS regulatory text.
The review is key to understanding bond transparency thresholds and liquidity assessments. Given the uncertainties around Brexit, it was felt that the analysis should be completed after the UK has left the European Union. This will now be due by 30 July 2020 and recent regulatory commentary suggests it will begin around March 2020.
This is another rescheduling to RTS 2, as data quality already delayed the SI regime for bonds until eight months after MiFID II go-live. The SI regime for derivatives is still not due to go live (for the same reason) until ‘at some point in 2020’. This Brexit-related delay to the review will almost certainly push the derivatives SI regime to the latter end of 2020, which in turn may delay the transparency reporting requirement under RTS 2 which looks at decreasing it from 15 minutes to five minutes in January 2021.
For regulatory reporting purposes, this brings further complexities to investment firms. Understanding of trading where the primary market liquidity is sitting, and its subsequent size and liquidity thresholds for deferral eligibility, is key. Ensuring you are reporting to the correct APA in Europe or UK brings transparency challenges too.