17 March 2020

EFAMA reply to ESMA CP on review report of MiFIR transparency regime for equity, ETFs and other related instruments

European Fund and Asset Management Association replies to ESMA’s consultation paper on MiFID II/ MiFIR review report on the transparency regime for equity and equity-like instruments, the DVC and the trading obligations for shares.

EFAMA believes that diversity in trading mechanisms supports best execution outcomes and is a defining feature of a mature market structure. SIs plays a role in providing liquidity and price improvement within this ecosystem and act as a ‘shock absorber’ for end-users by limiting price impacts of buy-side positions. EFAMA believes it is important to preserve these models in the MIFID review.

There is no evidence to indicate that SIs have had any negative impact on liquidity or price discovery. As sources of liquidity, they add much needed diversity and competition which only stands to benefit investors. Should SI activity be restricted in any way, the only beneficiaries would be primary markets which risks establishing an oligopoly in European markets.

EFAMA does not believe there ought to be any limitations on its ability to execute in a manner befitting its needs as market participants. EFAMA supports the removal of the share trading obligation (STO) and the double volume cap mechanism (DVC). Both requirements do not result in positive outcomes for market participants but end up creating a complex market structure in Europe to the benefit of primary exchanges only and the detriment of end-users.

EFAMA considers that the time between the application of the rule and its assessment is too short to propose strong improvement as requested by this consultation.

In addition, the timeline imposed to reply to the current consultation and the ESMA consultation paper MiFIR report on Systematic Internalisers in non-equity instruments is hardly compatible with the time required to collect and compile adequately the data needed.

Lastly, EFAMA urges ESMA to bear in mind that any change to regulatory reporting is a cost for the industry that should be requested only after a cost/benefit analysis.

Full reply on EFAMA

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