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MiFIR review: The right balance
Journal of Securities Operations & Custody,
15
(4),
291-303
(2023)
Abstract
Trading in shares in the European Union (EU) is fragmented across a large number of execution venues applying varying degrees of transparency. The review of the Markets in Financial Instruments Regulation (MiFIR) aims at creating the right conditions for the establishment of an entity, the consolidated tape provider, that provides a consolidated picture of core trading data to the market. Co-legislators principally disagreed on whether or not such a consolidated picture should include close to real-time data on prices and volumes on all pre-trade transparent trading venues (pre-trade data). Authors argue that important use-cases require the inclusion of pre-trade data and that the provisional political agreement reached on 29th June rightly recognises this. The review of MiFIR also includes amendments to the conditions under which individual execution venues are required to publish such pre-trade data. While there are good reasons for allowing ‘dark trading’, too much dark trading could harm the quality of price formation for shares. There is no strong evidence that the ‘volume cap’ which caps certain variants of dark trading has positive effects. The authors argue in this paper that a holistic and data-based approach to capping dark trading can contribute to the quality of price formation for shares. The consolidated tape will provide relevant data for such an approach.
Keywords: MiFIR; double volume cap; market structure; capital markets; consolidated tape
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Author's Biography
Ugo Bassi has been Director of Financial Markets at FISMA, the European Commission’s Directorate-General for Financial Stability, Financial Services and Capital Markets Union, since 2012. Lawyer by profession, Ugo started his career as a ‘référendaire’ at the European Court of Justice before joining the European Commission. In the last years, he held several management positions and was responsible for various post-crisis measures in the area of financial services and markets, namely post-trade, securities, asset management, audit, accounting, and credit rating agencies. He launched the Capital Markets Union (CMU) project, including the sustainable finance component, and secured the adoption of many legislative proposals in this context, among which the review of MiFIR.
Martijn Rookhuijzen has ten years’ experience in law making for the securities markets. He holds two law degrees and currently works in the Securities Markets Unit at DG FISMA as a ‘seconded national expert’. He started his work in DG FISMA amending MiFID II in the Capital Markets Recovery Package and, more recently, is one of the key drafters and negotiators of the MiFIR review. He furthermore drafted and coordinated the adoption of various level two acts related to data reporting services providers and coordinated the adoption of the recent review of RTS 1 and RTS 2. Prior to his work at DG FISMA Martijn was involved in the national implementation by the Netherlands of the Transparency Directive and the revision of the Shareholders Rights Directive.
