EU changes to the MIFID regime are here

Legislative amendments to MIFIR (Updated MiFIR) and MIFID (Updated MiFID) have been published in the Official Journal. The texts were introduced by the European Commission in November 2021 (see our briefing here). The majority of Updated MiFIR should apply from 28 March 2024, although several aspects need to be supplemented by EU delegated acts in order to be fully operational (this means that in some cases, the existing rules, together with the accompanying ESMA calculations will continue until the revised delegated acts/new delegated acts are finalised). The European Commission and ESMA have helpfully provided guidance navigating on this issue. 

Updated MiFID must be implemented in Member States by 29 September 2025.  The amendments to be made by Updated MIFIR are significant, covering changes to pre and post trade transparency, the emergence of a consolidated tape and the treatment of PFOF. 

The UK has also seen some changes to the MiFIR regime as a result of the Wholesale Markets Review (see our briefing here) and the coming into force of the Financial Services and Markets Act 2023 (see our briefing here). Aspects of the Wholesale Markets Review form part of Tranche 1 of the Smarter Regulation Framework (SRF), the process launched by the Government for repealing financial services retained EU law (now termed "assimilated law" under the Retained EU Law (Revocation and Reform) Act 2023). Under this process, assimilated law is reworked in line with the so-called FSMA model, whereby the UK regulators set firm-facing rules that operate within a framework set by the Government and Parliament (for more information, see our briefing here). 

In December 2023, the FCA issued a consultation (CP23/32)  on the transparency framework for the bond and derivative markets in the UK (for more information see our briefing here). This will involve the FCA working with the Treasury to ensure aspects of the transparency regime, set out in various pieces of legislation (UK MiFIR, the MiFID Org Regulation and MiFID RTS 2), are eventually transferred into the  FCA's Market Conduct Sourcebook. The FCA also published a Policy Statement for the framework for UK consolidated tape and a consultation on payments to data providers in December 2023. The FCA consultations followed the finalisation of FCA rules in relation to equity secondary markets (please see our briefing here). 

These developments at the EU and UK level will result in continuing divergence in respect of obligations for investment firms operating cross-border under the MIFID regime. We take a look at key issues below.

Transitional provision

As stated above, Updated MiFIR applies from 28 March 2024. In some areas, the provisions found in Updated MiFIR are to be supplemented by new/amended delegated acts, with Article 54(3) setting out a transitional provision. The European Commission has published an interpretative notice, while ESMA has also issued guidance in an attempt to provide clarity on how the regime will work. The European Commission states that those existing delegated acts applicable before 28 March 2024, as well as the provisions in MiFIR that they accompany, continue to apply in cases where Updated MiFIR provisions need new/amended delegated acts in order to become fully operational (i.e. the provisions cannot be supplemented adequately by the existing delegated acts). The European Commission has set out how this arrangement will work in relation to the volume cap mechanism; deferrals for non-equity instruments; and the obligation to make data available on a reasonable and commercial basis. ESMA has confirmed that it plans to create the relevant technical standards within deadlines set by Updated MiFIR and that it will publish additional guidance mapping applicable provisions. Firms will need to review this guidance closely in order to be fully prepared as what is set out below is a broad overview.

PFOF

Updated MiFIR introduces important changes to PFOF, the practice whereby brokers receive payments from third parties for directing client order flow to them as execution venues. The practice has raised a number of conflicts of interest concerns over the years, as it is argued that it encourages a firm to choose the third party offering the highest payment, rather than the best possible outcome for clients. Updated MiFIR prevents investment firms acting on behalf of retail and professional clients from receiving fees or commission or non-monetary benefits from third party for executing orders from the clients on a particular venue, or for forwarding orders to any third party for their execution on a particular execution venue. Rebates/discounts on transaction fees of execution venues are excluded from this provision (if permitted under the approved and public tariff structure of EU trading venue where exclusively benefitting the client and not resulting in a monetary benefit to the investment firm).

The general ban on PFOF contains a clause allowing Member States to phase this out by 30 June 2026 where, prior to the entry into force of Updated MiFiR, investment firms established under their jurisdiction provided these services to clients domiciled or established there. Attitudes to PFOF vary across EU Member States, with Germany already indicating that it will make use of the transitional provision.

Systematic Internalisers (SIs)

Updated MiFIR requires SIs to make public firm quotes on the basis of a minimum quote size, to be determined via RTS. This is not to exceed 90% of the threshold and will not be below the standard market size.

Pre-trade transparency requirements in respect of firm or indicative quotes to clients for non-equity instruments under article 18 and 19 have been removed. ESMA has indicated that this change is effective as of 28 March 2024. 

Commission delegated regulation (EU) 2017/587 only sets out the methods for determining the standard market size but does not discuss the minimum quote size and the threshold below which pre-trade transparency rules apply to equity SIs. Until the entry into application of the Commission delegated regulation adopted pursuant to Updated MiFIR, existing rules concerning the provision of public quotes by SIs in equity instruments continue to apply. The new rules for SIs introduced by Updated MiFIR will apply as of entry into application of the Commission delegated regulation adopted pursuant to Article 14(7) MiFIR.

ESMA has confirmed that it expects SIs to continue to apply the minimum quote size of 10% of the standard size outlined in Article 14 and 15 of pre-existing MiFIR; and comply with the provisions on the size up to which quotes must be made transparent (as set out in Article 10 of RTS 1) until the revised RTS 1 starts applying.

Recital 7 to Updated MIFID provides that the quantitative assessment for determining an SI has imposed a burden on investment firms and ESMA and states that the quantitative assessment should be replaced by a qualitative assessment in respect of equity instruments (the recitals note that this is because Updated MIFIR will exclude SIs from the scope of the pre-trade transparency requirements for non-equity instruments). ESMA will continue publishing the quarterly publications for the quantitative SI assessment until the amendments brought by Updated MiFID are transposed into national law. The quarterly SI publications will be discontinued afterwards.

Under updated MiFIR, SIs are to be allowed to match orders at midpoint at any size. ESMA states that restrictions concerning large-in-scale orders in RTS 1 will stop applying to SIs.

Designated publishing entity

Updated MiFIR introduces a designated publishing entity status for specific classes of financial instruments. This regime would allow an investment firm to be responsible for making a transaction public through an APA without having the need to take the status of SI. Where neither party to a transaction/both parties are DPEs, the entity selling the financial instrument would be responsible for making transactions public via the APA. ESMA will be required to set up and keep up to date a register of DPEs and the classes of financial instruments in respect of  which they are DPEs. 

The DPE regime is set to come into being on the date of application of MiFIR, but certain areas of the new regime remain unclear and may require some existing SI obligations to remain in place until these issues are resolved. For example, Updated MiFIR does not contain a definition of "classes of instrument" in respect of which investment firms can request the status of DPE. Firms will also need time to prepare their systems for the introduction of DPE register, so as to be able to report information correctly and adequately. In response to concerns raised by stakeholders, ESMA concedes that it may not be possible for the DPE regime to be up and running when Updated MiFIR comes into application. It states that the current approach of relying on SIs for post-trade transparency should remain in place, so as to give NCAs adequate time for granting DPE status. 

Updated MIFIR requires DPEs to give ESMA  the identifying reference data on OTC-derivativesnot captured by the first subparagraph of Article 27(1) and which fall within the scope of Article 26(2). ESMA has confirmed that rules applicable to reference data reporting, and the requirements to DPE in this respect, should become applicable as soon as the revised RTS start applying. Therefore, the rules found in pre-existing  MiFIR review and in RTS 23 continue to apply in the meantime.

In the UK, the FCA introduced a regime for designated reporters for similar purposes under Policy Statement PS 23/4 (see our briefings here and here for more information). 

Double volume cap

Updated MiFIR provides for a single volume cap set at 7% in respect of trading under the reference price waiver. ESMA is to regularly assess the volume cap threshold, taking into account factors such as financial stability and international best practices and make any relevant suggestions to the Commission. The single volume cap will apply from the date of application of the Commission delegated regulation to be adopted pursuant to Updated MiFIR. The double volume cap (covering the both the reference price waiver and the negotiated trade waiver for liquid instruments) as set out in the existing MIFIR and RTS 3 will  continue to apply until then. The Commission explains that this is because the data that is to be used for the for calculation of the single volume cap is different to that used for the calculation of the double volume cap. 

ESMA has confirmed that it will continue to publish double volume cap results (the next publication is scheduled for April) and will also make the necessary adjustments for replacing the double volume cap with the single volume cap 18 months after entry into force of Updated MiFIR.

In August 2023, the UK removed the double volume cap via FSMA 2023 (see our briefing here)

Consolidated tape provider (CTP)

MiFIR already contained provisions for a CTP that would provide a comprehensive view on the prices and volume of securities traded in the EU using market data from trading venues and APAs. The existing rules on the CTP envisaged a private actor to step up, but this has, however, not occurred. Therefore, Updated MiFIR empowers ESMA to organise a selection procedure for a single entity to provide a consolidated tape for each specified asset class, beginning initially with bonds by 29 December 2024. A CTP for shares is to follow soon after. Updated MIFIR provides for a CTP for derivatives to occur once technical issues are addressed via delegated act e.g. instrument identification for derivatives (UPI versus ISIN as discussed below in section on transaction reporting). It is unclear whether the scope of contracts to be included will be discussed. The process will involve all trading venues and APAs providing CTPs with market data (there are exemptions from this requirement, for example investment firms whose annual trading volume of shares is less than 1% or less of annual volume of shares in the EU). 

• Data to be supplied to CTP. Trading venues and APAs are to provide the regulatory data and core market data required to the CTP "as close to real time as technically possible". The data is to be submitted in a harmonised format, via a "high-quality transmission protocol". ESMA is to draft RTS in relation to quality of transmission protocol, measures to address erroneous trade reporting and enforcement standards in relation to data quality. ESMA will also elaborate on what constitutes the transmission of market data "as close to real time as technically possible". Updated MiFIR sets out the meaning of core market data in respect of different financial instruments. Regulatory data means data related to the status of systems matching orders in financial instruments and data related to the trading status of individual financial instruments. The requirement to deliver the core market data for free after 15 minutes is removed in respect of CTPs, to ensure their viability.
• CTP requirements. The CTP for shares and ETFs would be required to consolidate and display the best bid and offer spread of each trading venue in time of executed trade, along with European best bid and offer derived from that data. Organisational requirements for CTPs include the collection of market data from contributors; collection of fees from users; and disseminating core market data and regulatory data to users "as a continuous electronic data stream on non-discriminatory terms as close to real time as technically possible". CTPs will be required to publish certain information on their website. This includes: an inventory of data contributors supplying market data; and operational continuity measures in respect of the provision of core market data and regulatory data. The criteria for selecting a CTP will include appropriateness of methods and arrangements to ensure data quality; level of fees to be charged to core market data users; the simplicity of fee and licensing models; ability to receive consolidate and disseminate (as applicable) pre trade and post trade data for shares and ETFs, and post trade data for bonds and OTC derivatives. ESMA is to make a decision within 3 months of receiving the application and to adopt a so called reasoned decision.

UK CTP v EU CTP

The UK's CTP regime, as proposed by the FCA, will initially cover bonds that are admitted to trading or TOTV in the UK, with a CTP for equities expected to follow later. The requirement for a CTP to provide data free of charge 15 minutes after publication is removed. The FCA proposed that data transmitted from data providers and received by the CTP should be via a standardised open source API developed by the CTP (the FIX protocol was suggested by the FCA in its consultation paper). The CTP for bonds would only include post-trade information. The main differences between the EU CTP framework and the UK CTP framework relate to the collection of data (data providers will be required to send data to the CTP rather than the CTP collect data from the data providers); revenue sharing; and the tender process (the UK will be carrying out a two-stage auction amongst bidders rather than a single stage process). The FCA is also consulting on modes of payments by the CTP to data providers to reflect the costs of connecting to the CTP.

For the UK, the consolidated tape for bonds would include trade reports for all MiFID categories of bonds except exchange traded commodities (ETCs)/Exchange Traded Notes (ETNs) (the FCA, however, is open to looking at this issue again further down the line). The FCA discusses the CTP offering a deferral checking service for data providers and states that is for the CTP to decide whether it wants to offer a deferral checking service for data providers (though the responsibility for correctly applying the deferrals would ultimately lie with the trading venue or investment firm). 

Rules for the entire bond CTP framework are expected to take effect from 5 April 2024. The FCA plans to finalise the tender for the bond CTP and for it to go live in H2 2025. Plans for the operation of the bond CTP are based on the assumption that the deferrals regime for bonds and derivatives, outlined in the FCA's consultation paper, will have been implemented before the CTP is up and running.

Synchronisation of business clock

Updated MiFR extends the requirements for harmonisation of the synchronisation of business clocks to DPEs, SIs, APAs and CTPs. As stated in our briefing on the November 2021 proposal, this appears to be an area of "roll forward" rather than "roll backward" on MiFID II reforms.  Under Updated MiFIR, ESMA is charged with developing draft RTS setting out the level of accuracy for the synchronisation of business clocks. The start date for the DPE regime will need to factor in the length of time it will take for the RTS on business synchronisation to be adopted.

Share Trading Obligation

Updated MiFIR refines the existing share trading obligation to provide that only shares with an EEA ISIN and which are traded on a trading venue care are subject to the share trading obligation. The exemption for trades in shares which are non-systematic, ad-hoc or irregular and infrequent in existing MiFIR has been removed. In contrast, the UK removed the share trading obligation in UK MiFIR in August 2023 via FSMA 2023 rather than refining it (see our briefing here).

Pre-trade transparency for non-equity

There will be a significant change to fixed income trading venue protocols. The recitals state that pre-trade transparency is less important for bespoke trades traded bilaterally.  Updated MiFIR therefore amends existing requirements in article 8 (pre-trade transparency requirements for trading venues in respect of bonds, structured finance products and emission allowances) so that the requirement to publish firm or indicative quotes only applies to central limit order books and periodic auction trading systems. As a result, the waiver available above a ‘"size specific to the instrument" for request for quote systems and for voice trading systems in Article 9 is to be removed. ESMA is to set out in RTS the characteristics of central limit order books. 

In the UK, the FCA is proposing to introduce a transparency regime for bonds and derivatives whereby bonds traded on UK trading venues and derivatives subject to the clearing obligation will be assigned category 1 status, while other instruments (other derivatives, structured finance products and emission allowances) would be category 2. For trading venues, pre-trade transparency would apply for category 1 and 2 instruments depending on the nature of the market model (i.e. generally not applicable for voice and RFQ systems). 

Pre-trade transparency: derivatives

For derivatives, the requirement to publish firm or indicative quotes only applies to central limit order books and periodic auction trading systems and is set out in new article 8a of Updated MiFIR. The recitals to Updated MiFIR provide that the basis of transparency regime for derivatives (the traded on a trading venue concept) has been problematic and should be reworked so that the scope of transparency for derivatives should rely on a concept of predefined features of the derivatives. Exchange traded derivates will remain subject to transparency requirements and derivatives subject to the clearing obligation under EMIR will be subject to the transparency requirements (e.g. interest rate derivatives with the most standardised and liquid currency and tenor combinations). Credit default swaps, where centrally cleared (even where they are not subject to the clearing obligation), are to be subject to transparency requirements. This requirement was introduced during the negotiation process between the EU legislators and is in response to concerns that certain credit default swaps referencing global systemically important banks or referencing an index consisting of these banks might encourage speculation.

In the UK, the FCA proposed a common framework (setting out two proposed models) in respect of deferrals for bonds and derivatives, with the size of the threshold and length of deferral depending on certain aspects.

Post trade Transparency: Bonds  

New rules will require new programming logic as to when a trade is made pre-trade transparent. The new regime harmonises publication deferrals for fixed income post trade reports to the public and removes the discretion available to competent authorities in respect of the duration of the deferred period. The Large-In-Scale and Size-Specific-To-An-Instrument thresholds, above which certain details of trade could be deferred has been deleted.  Trading venues are to be required to disclose arrangements for deferred publication to market participants and the public. The maximum deferral periods for bonds are now proposed to be (ESMA to specify via RTS):

• Category 1 (transactions of a medium size in a financial instrument for which there is a liquid market): A price deferral and a volume deferral not exceeding 15 minutes.
• Category 2 (transactions of a medium size in a financial instrument for which there is not a liquid market): A price deferral and a volume deferral not exceeding the end of the trading day.
• Category 3  (transactions of a large size in a financial instrument for which there is a liquid market): A price deferral not exceeding the end of the first trading day after the transaction date and a volume deferral not exceeding one week after the transaction date.
• Category 4  (transactions of a large size in a financial instrument for which there is not a liquid market): A price deferral not exceeding the end of the second trading day after the transaction date and a volume deferral not exceeding two weeks after the transaction date.
• Category 5 (transactions of a very large size): A price deferral and a volume deferral not exceeding four weeks after the transaction date.

ESMA RTS will specify (among other things) the issuance sizes for a liquid/ illiquid market in bonds until maturity; and the transaction size in either a liquid or illiquid bond from which a deferral may be applied and the duration of the deferral.

Deferral rules: Transition

The European Commission has clarified that the deferral rules applicable before 28 March 2024, set out in RTS 2, continue to apply. ESMA has clarified that competent authorities can continue to authorise deferrals until the revised RTS 2 applies.

The new deferral regime will apply as of entry into application of the delegated acts under Articles 11(4) and 11a(3) respectively.

ESMA will continue to publish its quarterly liquidity assessment of bonds, taking into consideration the provisions of current RTS 2, until the date of application of the revised version of RTS 2.

In the UK, the FCA is proposing to introduce rules to require investment firms to comply with post-trade transparency requirements when dealing OTC in Category 1 bonds and derivatives, but would exempt investment firms from making public trade reports in respect of Category 2 bonds and derivatives.

Post trade transparency: other non-equity instruments

Article 11 of Updated MiFIR provides that deferrals in respect of structured finance products or emission allowances (or classes) traded on a trading venue are to be organised pursuant to RTS developed by ESMA on the basis of quantitative and qualitative analysis. ESMA will also publish RTS on the structured finance products/emission allowances traded on trading venue for which a liquid market exists.

Post trade Transparency: Derivatives

In respect of derivatives, Updated MiFIR provides for a deferral regime for exchange-traded derivatives and in respect of OTC derivatives (set out in Article 11) that is separate to that of other non-equity instruments. The deferrals regime is organised into five buckets based on size and liquidity, the duration of which is to be determined in RTS by ESMA: 

Category 1: transactions of a medium size in a financial instrument for which there is a liquid market; 

Category 2: transactions of a medium size in a financial instrument for which there is not a liquid market; 

Category 3: transactions of a large size in a financial instrument for which there is a liquid market; 

Category 4: transactions of a large size in a financial instrument for which there is not a liquid market; and

Category 5: transactions of a very large size.

For liquid or illiquid derivative derivatives (or classes), ESMA is to determine (among other things) what constitutes a transaction of a medium size, of a large size and of a very large size; and the price and volume deferrals applicable to each of the five categories.

The European Commission has clarified that the deferral rules applicable before 28 March 2024, set out in RTS 2, continue to apply. ESMA has clarified that competent authorities can continue to authorise deferrals until the revised RTS 2 applies.

The new deferral regime will apply as of entry into application of the delegated acts under Articles 11(4) and 11a(3) respectively.

ESMA will continue to publish its quarterly liquidity assessment of bonds, taking into consideration the provisions of current RTS 2, until the date of application of the revised version of RTS 2.

In the UK, the FCA proposed a common framework (setting out two proposed models) in respect of deferrals for bonds and derivatives, with the size of the threshold and length of deferral depending on certain aspects.

Transaction reporting

Updated MIFIR amends scope of transactions to be reported so that the now regime applies to:

• financial instruments admitted to trading or traded on a trading venue or for which a request for admission to trading has been made, irrespective of whether such transactions are carried out on the trading venue (except transactions in OTC derivatives other than those referred in Article 8a(2), to which the obligation will only apply when carried out on a trading venue);
• financial instruments where the underlying is a financial instrument that is traded on a trading venue, irrespective of whether these transactions are carried out on the trading venue;
• financial instruments where the underlying is an index or a basket composed of financial instruments that are traded on a trading venue, irrespective of whether these transactions are carried out on the trading venue;
• OTC derivatives (under Article 8a(2)), irrespective of whether such transactions are carried out on the trading venue.

The scope of information to be reported has been amended to include: designation of the entity subject to the reporting obligation, the effective date transaction identification code. The short selling flag and waivers have been removed.

A delegated act under Updated MiFIR is to be adopted, specifying wh financial instruments that have an index as the underlying that will need to be reported. The European Commission has confirmed that the transaction reporting regime applicable before 28 March 2024 and provided for in RTS 22 continue to apply. The new transaction reporting rules apply when the delegated acts to be adopted pursuant to Updated MiFIR enter into force. ESMA has confirmed that the reference data for both transaction reporting and transaction will continue to be reported to ESMA in accordance with existing reporting instructions and messages until the revised RTS under Updated MiFIR apply. Transaction data will also continue to be reported to NCAs.

Transaction reporting for OTC derivatives

Article 26 of Updated MiFIR clarifies that transaction reporting requirements are to apply to derivatives subject to post-trade transparency under Article 8(a)(2), irrespective of whether these transactions are carried out on a trading venue. ESMA must submit draft RTS to the European Commission by 28 September 2025, and it can be assumed that the existing transaction reporting regime, including its parameters, will remain in place until the RTS apply.

Updated MiFIR provides for identifying reference data to be based on a globally agreed UPI and on any other relevant identifying data. The recitals suggest that ISO 4914 UPI is to be used as an identifier for derivatives rather than ISIN, noting that many consider the ISIN to be cumbersome. The Commission is to specify, via a delegated act, the identifying reference data to be used for OTC derivatives, including a unique identifier and any additional identifying reference data. The Commission's work in this area will note that the most appropriate identifier for OTC derivatives in respect of transaction reporting may be different than that for transparency requirements. Whether this arrangement will suit all types of OTC derivatives, or has fully satisfied all stakeholders remains to be seen. 

Post trade risk reduction services (PTRRS)

Updated MiFIR clarifies that the derivatives trading obligation, best execution obligations and transparency requirements do not apply to transactions on OTC derivatives that are formed and established as result of PTRRS. It provides scope for the Commission to specify what constitutes post-trade risk reduction services and the particulars of the transactions to be recorded.

DTO and CO: Alignment of suspension 

The new regime includes provisions to suspend the trading obligation for the same class/classes of OTC derivatives that are subject to a suspension of the clearing obligation under EMIR. This is for instances where the suspension of the clearing obligation would lead to a material change in the criteria for the trading obligation. ESMA is also to ask the Commission to suspend the derivatives trading obligation where it this is considered necessary to avoid or address adverse effects to liquidity/serious threat to financial stability. 

Provision of trade data: Reasonable and commercial basis

Obligations under Article 13 in respect of making pre-trade and post-trade data available on a reasonable commercial basis have been updated. Guidance set out in ESMA's 2021 paper on the concept of "reasonable and commercial basis" is effectively converted into legal obligations. ESMA is to develop RTS on how the concept of reasonable commercial basis is to be applied. ESMA is to be charged with monitoring and assessing developments concerning data policies and price-setting in the market. 

The obligation to make pre- and post-trade data available on a reasonable commercial basis as applicable before 28 March 2024 (set out in Commission delegated regulation (EU) 2017/565, Commission delegated regulation (EU) 2017/567 and ESMA guidelines) continues to apply. The amended obligation provided for by Updated MiFIR to make pre-trade and post-trade data available on a reasonable commercial basis will apply as of entry into application of delegated act adopted pursuant to Article 13(5) MiFIR.

Access to trade data has been discussed by the FCA in its  December 2023 consultation on the transparency framework for the bond and derivative markets in the UK (CP23/32) (see our briefing here). The consultation paper proposed transferring the RCB provisions concerning trading venues into the FCA Handbook (new chapter (MAR 11). The FCA's Policy Statement (CP23/33) on a UK consolidated tape framework confirmed other changes in relation RCB rules (including deleting the requirement for a CTP to price on a RCB from the rules).

Updated MIFID changes

EU investment firms will also need to consider changes to be introduced via Updated MiFID.

• Recital 8 of Updated MiFID deletes the reporting obligation for investment firms, set out in Article 27(6) of MiFID II, to annually publish information on the identity of execution venues and on the quality of execution. Member States have 18 months to transpose this measure after the coming into force of the Directive.  As of 13 February 2024, however, EU investment firms have not had to publish RTS 28 reports, owing to a statement published by ESMA. This statement asked competent authorities to deprioritise actions against EU investment firms not publishing RTS 28 reports. Article 27 on best execution is also amended to require ESMA to develop RTS on the criteria to be considered for the purpose of defining and assessing the order execution policy (criteria will include: factors determining the choice of execution venues included in the order execution policy; the periodicity of assessing and updating the order execution policy; and ways of defining classes of financial instruments).
• Updated MIFID introduces a requirement for a report to be produced by the European Commission on the appropriateness of the commodity derivatives markets framework and derivatives on emission allowances markets. This will look into: whether the position limits and position management controls regime have assisted in preventing market abuse (among other things); the ancillary activity exemption and the existing criteria for the exemption; the impact of prudential requirements; and the key elements to obtain a harmonised data set for transactions by the commodity derivative market to a single collecting entity. The UK is making changes to the commodity derivatives markets framework via FSMA 2023 (which implements the Wholesale Markets Review) and is streamlining the process for ancillary exemptions via a statutory instrument. The FCA's December 2023 consultation paper set out key proposals such as: transferring responsibility for setting position limits from the FCA to trading venues; applying position limits only to certain commodity derivatives contracts; changes to position management controls (including the introduction of so-called accountability thresholds); and exemptions from position limits (for liquidity providers and a pass-through hedging exemption for financial firms).
• Clarification on the use of trading halts and price collars in MiFIR so to promote transparency on factors that lead to their use (these were used during the energy crisis).
• Adding a requirement that regulated market "have at least three materially active members or users, each having the opportunity to interact with all the others in respect of price formation" under the organisational requirements for regulated markets under article 47.