Latest Trilogue: SI and dark trading restrictions left to the wayside and a regional ban on PFOF retabled

European Commission has also been tasked with drafting an additional tape proposal aimed at bridging the gap between opposing views put forward by the European Parliament and Council, The TRADE understands.

The latest European Trilogue session took place on Monday as part of the ongoing Mifir Review in the Bloc. Among the key topics discussed were payment for order flow (PFOF) and the implementation of a consolidated tape (CT).

However, restrictions around systematic internalisers (SIs) trading at midpoint, the double volume cap (DVC) and the reference price waiver (RPW) were not discussed, sources familiar with the discussion told The TRADE. It suggests a potential change of heart towards the transparency regime in Europe or that those in discussions have become more focused on the other, more political subject matters.

“Without Trilogue we don’t know where the debate [around transparency] will end,” said one source. “The bandwidth for now has been eaten by other topics, so it is difficult to predict the final outcome.”


Those topics eating up the bandwidth of legislators are payment for order flow (PFOF) and the consolidated tape (CT), with both becoming increasingly politicised.

The practice of payment for order flow is perhaps one of the most divisive topics being discussed as part of the Trilogue process with drastically opposing views that range from an outright ban to a discretional member state by member state approach being proposed by various parties. With such opposing views, one party will likely have to compromise.

According to sources familiar with the matter, the most recent discussions that took place on Monday suggest a regional ban is now back on the table but with additional controls overlaid on top as a middle ground between the two viewpoints.

“It’s a pragmatic approach given the two sides cannot reach an agreement,” said the source. “But it would be a strong stumbling block to the European Union and the Capital Markets Union. If we proceed with this, where is the single market? This pragmatism may set a bad precedent. If this is accepted by institutions this could be done for any topic.”

As Mifid currently stands in Europe, the practice of paying for order flow is banned in some member states and allowed in others, similar to the rule change proposed on Monday.

“If you want to maintain the status quo, why make the amendments?” one source said.

Consolidated tape

Elsewhere discussions around the consolidated tape appear to have come to a standstill, according to those familiar with Monday’s discussions, with no agreement reached at this stage.

With no agreement reached, the European Commission has been tasked with drafting an additional proposal aimed at bridging the gap between the European Parliament and the European Council, The TRADE understands.

Opposing parties are arguing over the inclusion of pre-trade data in a consolidated tape for equities.

Those for the inclusion suggest it would lower the cost of data for participants and that a tape is not commercially viable without it. Those against suggest the tape would not be fit for purpose if pre-trade data is included as it could leave investors – both institutional and retail – subject to latency-based arbitrage strategies.

In a joint industry letter published by the European Fund and Asset Management Association, asset managers including JP Morgan AM, UBS and Vanguard, emphasised the importance of pre-trade data with fair prices for a consolidated tape and warned against the potential impacts a change of heart from regulators on pre-trade data could have.