MiFID’s Transparency Rules: ESMA Confirms Equivalence of Numerous Non-EU Venues

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[co-author: Anna Lewis-Martinez]

Implications for users of third-country trading venues as ESMA confirms the list of venues who meet the criteria in its updated opinions on transparency and position limits.

On 3 June 2020, ESMA published updated versions of its opinions on post-trade transparency and position limits for third-country trading venues (TCTVs) under MiFID II and MiFIR. ESMA had received requests to assess more than 200 TCTVs against the criteria set out in the opinions published in 2017. ESMA has now completed reviewing the information provided by the TCTVs and, as a result, has published:

Post-trade transparency opinion

ESMA considers that only a TCTV that meets all of the following criteria should be considered a trading venue for the purposes of the MiFIR post-trade transparency regime:

  • It operates a multilateral system
  • It is subject to authorisation in accordance with the legal and supervisory framework of the third country
  • It is subject to supervision and enforcement on an ongoing basis in accordance with the legal and supervisory framework of the third country by a competent authority that is a full signatory to the IOSCO Multilateral Memorandum of Understanding Concerning Consultation and Cooperation and the Exchange of Information (MMoU)
  • It has a post-trade transparency regime in place that ensures transactions concluded on that trading venue are published as soon as possible after the transaction was executed or, in clearly defined situations, after a deferral period

The Annex to the post-trade transparency opinion includes a list of 136 venues from 25 countries. Most have a positive assessment for all the instruments available on the venue, while several have a partially positive assessment (i.e., a positive assessment that is limited to a subset of instruments). Over half of the venues listed are US venues, including ICE, Nasdaq, and the New York Stock Exchange.

Investment firms concluding transactions on TCTVs not included in the list should make those transactions post-trade transparent via an approved publication arrangement (APA) by 3 October 2020. Investment firms are subject to the same obligations for transactions executed on TCTVs with a partially positive assessment, but only for instruments exempted from the positive assessment.

Position limits opinion

ESMA considers that only a TCTV that meets all of the following criteria should be considered as a trading venue for the purposes of the MiFID II position limit regime:

  • It operates a multilateral system
  • It is subject to authorisation in accordance with the legal and supervisory framework of the third country
  • It is subject to supervision and enforcement on an ongoing basis in accordance with the legal and supervisory framework of the third country by a competent authority that is a full signatory to the MMoU

The Annex to the position limits opinion includes a list of seven venues from four countries. All venues on the list have a fully positive assessment. ESMA confirms that commodity derivatives traded on venues included on the list should be not be considered economically equivalent OTC contracts for the purpose of the position limits regime.

ESMA considers that this exercise has now been finalised. However, ESMA remains open to future submissions from TCTVs, should they have EU market participants that consider such assessment would be relevant. Therefore, firms should continue to monitor the Annexes to the opinions for any updates to the lists.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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