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20th December 2016

Pre-trade transparency waivers

The FCA has written to UK market operators and UK investment firms that operate trading venues (i.e all UK operators of trading venues) with regards to a timetable for pre-trade transparency waiver applications following a publication by ESMA.

The European Securities and Markets Authority (ESMA) have recently published Q&A on the process of how it delivers opinions to national competent authorities with regard to pre-trade transparency waivers that will affect anyone who seeks to operate a trading venue under the revised Markets in Financial Instruments Directive (MiFID II).

MiFID II and MiFIR – the Markets in Financial Instruments Regulation – is due to be implemented across the EU in just over a year’s time, on 3rd January 2018.

MiFIR: Extended Scope

As most firms will now be aware, MiFIR extends the scope of the transparency obligations to equity-like instruments and non-equity instruments. Thus this will capture instruments such as the following:

Depositary receipts;
Exchange-traded funds;
Certificates and other similar financial instruments;
Bonds;
Structured finance products;
Emission allowances; and
Derivatives

The FCA’s letter advises that a pre-trade transparency waiver will be available provided the relevant requirements are met since competent authorities are able to waive the obligation for trading venues to make public the information required by MiFIR. They continue to advise that trading venues should submit application to the regulator, where relevant, in order to obtain prior approval to benefit from the pre-trade transparency waiver.

In turn, the regulator must notify ESMA and other competent authorities of the intended use of each individual waiver and give an explanation with regards to its functioning no less than 4 months prior the intended effective date of the waiver. Once received, ESMA then has 2 months to revert with an opinion on the waiver.

Two-stage Deadline for Pre-trade Transparency Waiver Applications

Since it was anticipated that a high level of waivers will be expected towards the end of 2017, just before MiFIR and MiFID II become effective, ESMA has recently asked trading venues for their views on whether it would be beneficial to lay out an implementation timetable for the processing of pre-trade transparency waiver notifications during 2017.

Given the response, ESMA has now decided that waivers will be processed in two stages over the course of next year with equity and equity-like instrument waiver applications being sent first, followed later by non-equity waiver applications.

Thus, trading venues should ensure they submit their waiver applications as required by 1st February 2017 for equity and equity-like instruments and by 1st June 2017 for non-equity instruments (bonds and derivatives).

Whilst waiver applications can be sent outside of the deadlines, they will processed on a ‘best efforts’ basis only.

UK Waiver Applications

It should however be noted that the UK implementing legislation to enable the FCA to receive waiver applications under MiFIR is not yet in place which means that the FCA can currently only accept pre-trade transparency waiver applications in draft form.

Whilst the FCA’s online gateway will be only able to accept draft waiver applications from 30th January 2017, before this time firms should submit them to the FCA via email.

It is expected that more information on the process will be given by the FCA in January 2017.

MiFID II Compliance Support

If your firm is currently reviewing how MiFID II will impact your business and require support or assistance in planning for MiFID II implementation, please contact our experienced regulatory & compliance support team, who would be happy to help.