The Committee of European Securities Regulators (CESR) is planning to take a more active role in decisions about granting pre-trade transparency waivers to dark trading venues.
At present, trading venues that want to offer non-displayed trading, and thus waive MiFID’s pre-trade transparency requirements, must go to their national regulator for approval.
However, in a recent call for evidence about the impact of MiFID on secondary markets, some industry participants voiced concerns about the influence of non-displayed trading on the price formation process. CESR has said it will release guidance on pre-trade transparency waivers by the end of the month.
“Domestic regulators plan to work more closely, through CESR, on the decisions to grant pre-trade transparency waivers to ensure supervisory convergence across Europe,” a spokesperson for CESR told theTRADEnews.com. “The process to decide on transparency waivers will be explained by CESR around the end of March. At this stage, we anticipate this will be in a questions-and-answers format.”
Pre-trade transparency waivers allow venues to trade certain orders without publishing pre-trade data. There are currently three types of waiver: a large in scale (LIS) waiver, where non-displayed orders must be a minimum proportion of the average daily turnover and market capitalisation of a stock, as defined by CESR; a pegged-to-reference waiver, where quotes for dark orders are pegged to those on a primary exchange; or an order management system waiver, which can include functionality such as iceberg orders.
Dark trading in Europe has been under particular scrutiny in recent weeks. Last week it emerged that the Financial Services Authority, the UK’s financial regulator, has asked NYFIX Euro Millennium, a pan-European dark pool, to modify certain aspects of its offering, thought to be related to pre-trade transparency waivers.