EU’s legislative procedure steps up the pace on revised MiFIR and MiFID II

EU’s legislative procedure steps up the pace on revised MiFIR and MiFID II image

Matthew Vincent takes a look at what we might expect to see in the revised EU MiFIR Article 26, “Obligation to report transactions”.

After many months of discussions starting from ESMA concluding its EU MiFID Review, the EU Parliament has caught up with the EU Council and has reached its own negotiating position on amendments to MiFID II and MiFIR.  We have now reached the “trilogue” stage during which time the Commission, Council and Parliament will work to agree on the final wording of the legislative text. Trilogues are set to commence in April and we expect to see the final legislative changes agreed during Q3 2023.

Level 1 agreement though is only the start, as ESMA will consult and draft an amended RTS 22 before we really know all the details and the impact on firms.

That said, a comparison of the two “negotiating” versions of the Level 1 texts gives us some idea of where we’ll likely end up by Q3.

  1. The short selling flag seems very likely to be removed as it has been removed from both versions.  
  2. The reporting obligation will probably be extended to derivatives “subject to the clearing obligation set out in Article 4 of Regulation (EU) No 648/2012 executed outside a trading venue.”
  3. Powers may be granted to ESMA to assess the possibility of extending the reporting obligation to include AIFM and management companies.
  4. The problems associated with TvTIC will probably not all be solved by its promotion to Level 1
  5. ESMA is also instructed to draft regulatory technical standards to specify:
  • The conditions for linking specific transactions and the means of the identification of aggregated orders resulting in the execution of a transaction.
  • The date by which transactions are to be reported.

As always, the devil will be in the detail of the RTS and perhaps a revised set of guidelines will also be forthcoming.  But for now at least we can get ready to say farewell to the short selling requirements and do our collective best to avoid the temptation to say “we told you so”.

  • For a conversation with Matthew on the upcoming changes to EU MiFIR, please get in touch.