Several large trade associations across Europe have called on policy makers to amend certain aspects of MiFID II ahead of a review, including reporting on best execution, the systematic internaliser (SI) regime, market data costs and more.
A paper published by the European Forum of Securities Associations (EFSA), which encompasses groups such as the Association for Financial Markets in Europe, the French Association of Financial Markets, and the German Federal Association of Securities Trading Firms, stated that the European Commission should prioritise those aspects of the upcoming review of MiFID II that have caused unintended consequences for the market.
For the SI regime, the trade associations agreed that some firms have decided to operate as SIs in order to “shoulder reporting responsibility for their clients”, with the buy-side compelled to trade with SIs to meet reporting requirements in cases that they do not have internal reporting capabilities.
EFSA has suggested that instead, counterparties should agree who will report, while the existing reporting structure acts as a backup in cases where an agreement is not made.
Furthermore, the association said best execution reporting under RTS 27 has failed to achieve its intended objective, and due to the “extreme level of detail, the uncertain scope and one-size-fits all approach, large volumes of unhelpful data are currently being published which is of very limited use to investors, investment firms and trading venues”.
EFSA has urged the European Commission to provide clarifications regarding scope and standardise the reports that are published, adding that a rigorous consultation process should to place before the review of MiFID II.
“[MiFID II], in conjunction with Level 2 and Level 3, forms the cornerstone of financial regulation for securities markets in EU. However, there are some areas of [MiFID II] which need recalibration in order to deliver the intended policy outcome and to avoid unintended harm to the market, liquidity and investor choice,” the EFSA’s paper said.
The European Securities and Markets Authority (ESMA) confirmed in November that it would take a staggered and focused approach to the upcoming review of MiFID II. Steven Maijoor, chair of ESMA, acknowledged MiFID II has achieved some of its goals, but recognised there are areas where improvements may need to be considered.
Maijoor added that over the next few months, the industry should expect several key consultations and review reports, specifically on the MiFID II transparency regime, including the double volume cap, derivatives trading obligation and SI regime.