Response to ESMA on MiFID II/MiFIR

FESE welcomes the opportunity to provide input to ESMA on their draft Regulatory Technical Standards (RTS) on Level 2 of MiFID II / MiFIR. In particular, FESE would like to bring the following points to the attention of ESMA with regards to their proposals.

(i) Transparency of equity and equity-like instrument

• Request for Quotes systems (RFQs): ESMA must restrict the RFQ to equity-like instruments only as we are concerned that for equity instruments, these systems could create a loophole in terms of pre-trade transparency and ‘multilateral nature’ of exchanges. We consider that there is no need for these types of venues for equity instruments, which are order driven markets.
• Systematic Internaliser regime: FESE is concerned with the potentially flexible transparency regimes for SIs than the one applicable to which market-makers active on multilateral platforms. We are also concerned that SIs will be able to execute at any price that means that they are not in line with the harmonized tick size and they may price improve over bid and offer prices posted on regulated markets and MTFs at virtually no cost because also their quotes do not need to meet the minimum tick size. We therefore suggest that applying a harmonized tick size regime to SIs to ensure a level playing field between RMs, MTFs and SIs.

(ii) Transparency of non-equity instruments

• Transparency regime for Exchange Traded Derivatives (ETDs): FESE is concerned about the approach pursued by ESMA for ETDs. FESE has serious concerns with the proposed LIS thresholds, which in many instances will actually result in a reduction in the current levels of transparency. Our analysis, which both FESE and our members will include in their response to the consultation, indicates two very concerning outcomes of the ESMA proposal: (i) Low thresholds proposed for very liquid contracts; and, (ii) High thresholds proposed for very illiquid contracts.

(iii) Data publication issues

• Data disaggregation: While FESE strongly appreciates ESMA’s approach as regards a mandatory disaggregation of four asset classes, we do not agree with further disaggregation, as we strongly believe it will add to unmanageable complexity and potentially higher costs to the end user instead of lower cost and thus be neither proportionate nor efficient. ESMA must consider that any unbundling exercise that must be undertaken increases costs. This must be taken into account when considering the Technical Advice on “reasonable commercial basis” for market data.

(iv) Microstructural issues

FESE would like to highlight to ESMA that we have made a number of proposals with regards to the microstructural portion of this consultation. We urge ESMA to take into account our proposals regarding RTS 15 due to the fact that as trading venues, FESE members have extensive experience in this area.