The latest draft of the regulation that will accompany MiFID II will give national regulators a degree of control for deciding rules on delays to trade reporting, marking a significant shift in the stance of the European Commission (EC).
According to a draft dated 7 October seen by theTRADEnews.com, national regulators will be able to decide when trades are eligible for deferred publication based on their type or size.
The accompanying regulation – referred to as MiFIR – states that trading venues “shall obtain the competent authority’s prior approval of proposed arrangements for deferred trade-publication, and shall clearly disclose these arrangements to market participants and the investing public”.
The EC will use delegated acts that will accompany MiFIR to detail the overarching criteria for trades that qualify for delayed publication, effectively giving national regulators a framework to work within.
Pan-European securities watchdog the European Securities and Markets Authority will be responsible for monitoring how trade reporting delays are applied and provide an annual report to the EC on how they are used in practice.
MiFIR’s deferred publication regime raises the possibility that a stock traded on both its domestic market and a multilateral trading facility – most of which are regulated by the UK’s Financial Services Authority – could be subject to different delay regimes depending on the regulators involved.
“We could potentially have a less harmonised regime for deferred publication,” commented Guy Sears, director of wholesale at UK buy-side trade body the Investment Management Association. “It seems a strange approach and would give the UK regulator a lot of authority, given that many of the MTFs are located in London.”
A potential benefit of giving national regulators discretion over trade reporting delays, said Sears, is that it could provide a means of testing for the most optimal delay regime.
The issue of trade reporting delays has been a hot topic for the buy- and sell-side since the EC signalled its intention to reduce the permissible delay for large trades from four days to the end of the trading day in its MiFID consultation document released at the end of last year. While the EC’s rationale for reducing the trade delay regime was to increase market transparency, it would give brokers less time to unwind risk trades, therefore increasing the chance of market impact.
A delegation of buy-side trading heads met with EC officials in March 2011 to put forward their case against shorter trading delays. However, at the TradeTech conference in London a month later, Laurent Degabriel, policy officer for securities markets at the EC, reaffirmed the Commission’s commitment to greater transparency.