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Markets and Securities Services | Issue 46
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on behalf of both transaction parties, then that
manager will be acting in the capacity as a seller
and therefore be responsible for the post-trade
publication. Today under MiFID, asset managers
who undertake agency cross-trades are required
to undertake post-trade transparency. However,
given the increase of in-scope instruments to cover
equity and non-equity instruments, this will have a
greater impact on asset managers.
Being responsible for the post-trade publication
of transaction information will likely require
systems build for a number of asset managers,
and the introduction of internal processes and
procedures and engagement with APAs to whom
the information is required to be provided. The
Delegated Regulations detail further information
with respect to the exact information, and the
format of such, which will need to be distilled and
built into these systems. One of the key challenges
with post-trade transparency is the speed with
which it needs to be reported. As summarised
earlier in this article, this is “as soon in real-time as
is technically possible”, which is detailed as being
within 15 minutes for non-equity instruments. The
potential challenge for asset managers will be how
they will be able to collate the required information,
ensure it is in the correct format and get this to the
APA in such a timeframe.
More data will be available
As the breadth of in-scope instruments and
transactions is increased under this expanded
transparency regime so will the amount of pricing
data made available to the public. From a pre-trade
transparency perspective, each EU trading venue
and SI will be required to make public its bid/offer
prices and quotes, enabling potential investors
to have better visibility as to price discovery on a
wide number of instruments. From a post-trade
transparency perspective, executed transaction
pricing will also be available.
What is the impact on asset managers?
The increased information in the market as a result
of the extension of the transparency regime may
assist asset managers in achieving better pricing.
Having the ability to see quotes and executed
prices will enable asset managers to negotiate
pricing with brokers as they will be able to rely on
publically available data. This may also mean that
asset managers choose to vary the usual trading
venues at which their trades are executed to ensure
they receive the best price available, which, in
turn, should reduce fragmentation of liquidity in
the market. There is a potential that this increased
transparency may mean asset managers wish to
revisit current trading strategies to take advantage
of increased pricing data.
There is some concern in the market that this
increased transparency regime will affect liquidity
as firms try to avoid the pre-trade transparency
obligation by reducing the number of quotes they
provide or provide quotes that are not subject to
the transparency obligation. While this is a potential
response to the MiFIR transparency regime, it
is thought that generally firms are preparing
themselves to open the doors on their prices.
Asset managers, along with other clients of
brokers and other market participants who owe
transparency obligations, may need to prepare
for changes to fees and charges imposed by such
entities. While firms owing transparency will not be
able to directly pass back the costs of compliance
with the transparency obligations, it may be the
case that clients witness an increase in charges for
services they are provided by their brokers.
What is the status and what happens next?
The EC adopted the Equity DR and Non-Equity
DR on 14 July 2016. These Delegated Regulations
are now subject to a scrutiny period by the
European Parliament and Council. If neither the
Parliament nor the Council objects to the Delegated
Regulations, they will be published in the Official
Journal and will enter into force twenty days later.
ESMA will also publish further guidance in the form
of a Q&A document, which will provide ESMA’s
expectations with respect to MiFID II/MiFIR and be
continually updated. We have not yet seen a draft
of the Q&A. However, it is understood that this will
not be published until all RTS have been finalised.
Peter Bevan
Partner
Linklaters LLP
1
Directive 2014/65/EU of the European Parliament and
of the Council.
2
Regulation (EU) No 600/2014 of the European Parliament
and of the Council.
3
Commission Regulation (EC) No 1287/2006.
4
Commission Delegated Regulation C(2016) 4390.
5
Commission Delegated Regulation C(2016) 4301.
6
ESMA Final Report Draft Regulatory and Implementing
Standards MiFID II/MiFIR 28 September 2015 | ESMA/2015/1464.
7
“[A]s soon as real-time as is technically possible being: (a)
for the first three years of application of Regulation (EU)
No 600/2014, within 15 minutes after the execution of the
relevant transaction; (b) thereafter, within 5 minutes after
the execution of the relevant transaction.”