Institutions are closely following the MiFID II negotiations, and for obvious reasons: the sequel to 2007’s headline regulation threatens to have a similarly large impact on the shape of European – and even global – markets. But, for such a high priority issue, up-to-date information has been relatively hard to come by.
At an October conference in Brussels, Marcus Ferber, the rapporteur for MiFID, told delegates that there were three key outstanding issues on which the institutions of the EU were struggling to agree, those were: the scope and detail of OTF requirements, the size and applicability of pre-trade transparency waivers, and the rules relating to third country firms. So how far have we come since then?
OTFs remain a key issue of disagreement between the Parliament, Council and Commission. Notably, it appears the EP is particularly resistant to the inclusion of equity OTFs, which would allow equities to be traded in the dark and harm the chances of fair price discovery on public venues. However, the Parliament is also attempting to strengthen the limits on matched principal trading and so may have to give ground on one issue or the other in order to reach a compromise with the other institutions.
It also appears that some issues of consumer protection have returned to the table, including the classification of municipals and the rules on inducements and the breakdown of costs for investors. General consensus seems to be that this is a less contentious issue and that there is room for negotiation and agreement between the different institutions.
Other issues exist around more detailed points – such as the definition of forwards – and what can or cannot be delegated to ESMA or even national authorities. But for the moment, disputes over OTFs continue to be the headline disagreement. It appears we are making progress, but whether or not this points to a successful December plenary session remains to be seen.