September 28, 2020

Volume X, Number 272

September 28, 2020

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September 25, 2020

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EFSA Comments on MiFID II Recalibration

On January 20, the European Forum of Securities Associations (EFSA) published a letter to the European Commission (the Commission) outlining the changes they would like to see to the Markets in Financial Instruments Directive (MiFID II) and the Markets in Financial Instruments Regulation (MiFIR) (together, MiFID 2/R). This is in anticipation of the Commission’s review of MiFID 2/R in July 2020.

In relation to market structure, EFSA set out the following “key issues”:

  • in general, the EU should make “the necessary equivalence determinations” and/or reduce the extraterritorial application of the rules, in order to “maintain the EU’s attractiveness as a listing location for issuers;”

  • regarding the share trading obligation (STO), the scope is too broad and that the rules disadvantage EU-based investment managers by encouraging investors to access liquidity outside of the EU;

  • regarding the “tick size regime” for systematic internalizers (SIs), which requires EU trading venues to adopt a minimum increment for financial instruments depending on the liquidity and price, the current rules “inhibit appropriate price formation;”

  • the status of SIs in the trade reporting hierarchies give them an unfair competitive advantage, and that there can otherwise be uncertainty about which counterparty should report. To resolve this, counterparties should be able to agree who will report; and

  • the definition of SIs sometimes inappropriately applies to certain derivatives traders.

EFSA also have concerns about the following:

  • data quality continues to be too low and, while EFSA supports a “properly constructed [consolidated tape], this would not resolve the “conceptual flaws” and “insufficient enforcement” of MiFID 2/R requirements;

  • the rising cost of market data is a “significant issue,” and ESMA should address this by enforcing “existing regulatory requirements;”

  • costs and charges disclosures should be “simplified and proportional,” and firms should be able to provide different disclosures to wholesale and retail clients;

  • product governance rules are not proportionate and, in the context of ordinary shares and bonds, should be aligned with the primary market requirements;

  • best execution requirements are creating “large volumes of unhelpful data,” and there is not enough clarity regarding the scope and format of the reporting; and

  • as a result of the unbundling rules, there is less research being produced, especially concerning small- and medium-sized enterprises (for more information, please see the September 27 edition of Corporate & Financial Weekly Digest).

EFSA’s letter is available here.

©2020 Katten Muchin Rosenman LLPNational Law Review, Volume X, Number 24


About this Author

John Ahern, Financial Attorney, London, Katten Law Firm

John Ahern, partner at Katten Muchin Rosenman UK LLP and head of the London Financial Services group, focuses his practice on banking, financial services, UK and European financial markets, and related regulations. His background in private practice and as in-house counsel at a global investment bank provides him with perspective on the unique regulatory issues facing the wholesale and private banking sectors. John advises multilateral trading facilities, broker-dealers and banks on trading, clearing and settlement as well as custody of securities—both physical and...

+44 (0) 20 7770 5253
Carolyn H. Jackson, International Attorney, Katten Muchin law firm

Carolyn Jackson is a partner in Katten Muchin Rosenman UK LLP and is a Registered Foreign Lawyer. She provides US financial regulatory legal advice to a broad range of market participants, including commercial banks, investment banks, investment managers, broker-dealers, electronic trading platforms, clearinghouses, trade associations and over-the-counter derivatives service providers.

Carolyn guides clients in the structuring and offering of complex securities, commodities and derivatives transactions and in complying with US securities and commodities laws and regulations. 

+44 0 20 7776 7625
Nathaniel Lalone, Katten Muchin Law Firm, Financial Institutions Attorney
Senior Associate

Nathaniel Lalone, a partner at Katten Muchin Rosenman UK LLP, has a broad range of experience in the regulation of financial products and financial markets, and frequently provides regulatory and compliance advice to trading venues, clearing houses and buy-side firms active in the over-the-counter (OTC) derivatives, futures and securities markets. He is actively involved in advising clients on the implementation of MiFID 2 and MiFIR in the European Union as well as the international reach of US financial services regulation. He also has significant experience with structuring...

+44 0 20 7776 7629
Neil Robson, private equity fund managers counselor, Katten Law Firm, London

Neil Robson, a regulatory and compliance partner with Katten Muchin Rosenman LLP, focuses his practice on counseling hedge and private equity fund managers and other investment advisers on operational, regulatory and compliance issues. He regularly addresses Financial Conduct Authority (FCA) and EU authorization and compliance under both the EU Alternative Investment Fund Managers Directive (AIFM Directive) and MiFID, cross-border issues in the financial services sector, market abuse, anti-money laundering and regulatory capital requirements, formations and buyouts of...