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Global Trustee and Fiduciary Services News and Views | MiFID II Special Edition 2016
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an EU trading venue rest with the trading venue
itself. For trading taking place off an EU trading
venue, only SIs are required to provide pre-trade
transparency (Article 14 and 18 MiFIR). For post-
trade transparency (Articles 20 and 21 MiFIR), SIs
and investment firms trading OTC are subject to
post-trade transparency obligations.
Post-trade transparency for investment
firms trading OTC: who’s responsible?
Investment firms trading OTC, pursuant to Articles
20 and 21 MiFIR, are required to “make public
the volume and price of those transactions and
the time at which they were concluded” via an
approved publication arrangement (APA). This
has to be undertaken “as soon as real-time is
technically possible”. For equity instruments, this
means (where the transaction takes place during
the daily trading hours of the most relevant market
in terms of liquidity of the instrument in question)
one minute, and in any other case immediately
on the opening of trading of that market on the
following day. For non-equity instruments, this
is phased in and means within 15 minutes of
execution, until 2021, and thereafter 5 minutes.
As set out above, for post-trade transparency, all
investment firms are potentially in-scope to make
public details of transactions executed off an
EU trading venue. However, only one post-trade
publication is to be made per transaction so one
needs to establish which trade counterparty should
be making the publication. For both equity and
non-equity instruments, where the transaction is
executed OTC between two investment firms, the
general rule is that the “seller” always reports unless
one firm is an SI, in which case the SI must report
(Article 12(4) and (5) Equity DR and Article 7(5)
and (6) Non-Equity DR). Therefore, in the absence
of an SI, it will be the selling investment firm’s
responsibility to provide post-trade transparency.
However, the question then arises: who is
responsible where one of the trade parties is
established outside the EU and therefore not
technically an investment firm? MiFIR, Equity DR
and Non-Equity DR are silent with respect to who it
should be. However, this was not initially the case.
It is interesting to note that in early drafts of the
RTS on transparency for equity and non-equity
instruments prepared by ESMA, the recitals stated
that where the transaction is executed between an
EEA investment firm and a non-EEA firm, the EEA
firmmust report (recital 5, RTS 8 and recital 12,
RTS 9 of ESMA Consultation Paper on Regulatory
Technical Standards on MiFID II/MiFIR 19 December
2014 | ESMA/2014/1570). Notwithstanding this, the
What is the impact on asset managers?
Where asset managers are trading with EU
investment firms, it will predominantly be the
case that the asset manager will be the buyer
and therefore can rely on their counterparty to
perform the post-trade transparency. However,
where an asset manager is transacting with a
non-EU counterparty, it will be the asset manager’s
responsibility to ensure post-trade transparency
takes place. Another situation that may bring
about a post-trade transparency obligation on
asset managers involves agency cross-trades. In
this scenario, as the asset manager acts as agent
The global
financial crisis
serves as a
grim reminder
of how complex
and opaque
some financial
activities and
products have
become.
Michel Barnier, 2011 European Union
Commissioner for the Internal Market
accepted view is that where an investment firm
is trading with a non-EU established entity, the
investment firm will be required to undertake the
post-trade transparency, regardless of whether it is
the seller or buyer to the transaction in question.
This is because the primary requirement set out
in Articles 20 and 21 MiFIR states that it is the
investment firms that shall make the transaction
information public, while the Delegated Regulations
specify which counterparty this should be where
both are investment firms. Clearly, where there is
only one investment firm party to the transaction,
it shall be responsible for post-trade transparency.