Adoption of amendments to RTS 1 & 2 on equity and non equity transparency
The European Commission (finally) adopted its long awaited amendments pertaining to regulatory technical standards – RTS 1 equity (C(2023)245)) and RTS 2 non-equity transparency (C(2023)246))– on pre-trade and post-trade transparency requirements under MiFIR.
?As way of background in March 2022 ESMA submitted to the EC the Final Reports including the final proposals to amend RTS 1 and 2. On 22 November 2022, the EC informed ESMA of its intention to endorse the amendments to RTS 1 and 2 subject to changes.
?Key changes
RTS 1 & 2 - Harmonisation of the types of transactions considered as non-price forming
o??Commission’s rationale: the concept of ‘non-price forming transactions’, which leads to the application of among other things the negotiated trade waiver as well as exemptions for post-trade transparency for off-exchange transactions has not been fully harmonised across these different provisions which has led to inconsistent publication of post-trade transparency information and flagging of transactions and eventually resulted in unsatisfactory quality of data reported.
RTS 1 - Increase of the threshold above which orders and transactions in ETFs benefit from the large in scale waiver and deferral
o??Commission’s rationale: the level of transparency specifically for ETFs remains rather low - this is caused by the large amount of orders and transactions eligible for pretrade transparency waivers and post-trade deferrals based on the size (‘large in scale waiver and deferral’).
RTS 1 & 2 contain the data fields that should be provided for in post-trade transparency reports by approved publication arrangements (APAs) and trading venues (regulated markets or multilateral trading facilities) such as ‘time’, ‘price’ and ‘quantity’, as well as various ‘flags’ specifying the type of transaction, and prescribes how these fields should be populated for various different financial instruments.
o??Commission’s rationale: the poor quality of these post-trade transparency reports has led to criticism and is one of the main reasons identified by the European Commission and the ESMA that a consolidated tape has not been established. The delegated regulation contains amendments which aim at increasing clarity and harmonisation of the data standards.
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RTS 1 - Specifications on delivery of data to competent authorities in relation to calculations of the average daily turnover, average value of transactions, as well as which market is the most relevant market in terms of liquidity.
RTS 2 - Specifications on delivery of data to competent authorities in relation to calculations of various thresholds, such as the large in scale threshold and the size specific to the instrument threshold as well as the liquidity determination.
RTS 1 & 2 - Clarification of the legal status of so called ‘hybrid systems’ such as central limit order book systems and request for quote systems and makes technical adjustments to the exact moment of the day at which a publication of which the deferral has lapsed should be published.
Next steps
?With the Commission’s adoption of the delegated acts, the EP and Council’s 3 months scrutiny period has been opened.
?Both RTSs will apply 20 days after their publications in the OJ.
?RTS 1’s?Article 1, points (2), (3), (5), and (8) as well as RTS 2’s Article 1, points (2), (4), (5), and (7) shall apply from 1 January 2024.
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