Changes from plenary report to adopted text

Removed(22) There is an objective difference between a venue of primary admission and other trading venues that serve as secondary trading markets. A venue of primary admission admits companies to the public markets, playing a crucial role in the life of a share and for the share’s liquidity. This is particularly true in the case of shares listed on smaller regulated markets which remain typically traded mostly on the venue of primary admission. In smaller regulated markets and SME growth markets the level of concentration of trading in shares, for which they are also the venue of primary admission, means that their relative contribution to the fragmentation of trading in the Union is less significant compared to that of larger regulated markets. The average daily trading volume of shares in the smaller regulated markets is relatively low, often accounting for less than 1 % of the average daily trading volume of the Union as a whole. Smaller regulated markets and SME growth markets are, on average, less diversified and more dependent on data revenues, and the mandatory contribution to the consolidated tape for shares could deprive them of their most important source of income. Therefore, given the lower levels of fragmentation of smaller markets, their relative share of the overall trading landscape and legitimate concerns about the viability of their business, an exclusion from the mandatory contributions to the consolidated tape should be considered appropriate to allow them to maintain their local admissions and safeguard a rich and vibrant ecosystem in line with the objectives of the Capital Markets Union. From a procedural perspective, the first exclusion criterion should be market share; if the market share at any future point exceeds the threshold set out in this Regulation, fragmentation criteria should apply as alternative exemption criteria. Notwithstanding the mandatory contribution exemption, smaller regulated markets that wish to be included in the consolidated view provided by the consolidated tape should be able to opt in to the mandatory contribution scheme by notifying ESMA of their intent. Nevertheless, the development of a consolidated tape should aim to eventually attain a complete representation of the Union’s trading venues, to achieve the full benefits of an integrated capital markets union.

Removed(23) The desired outcome of the consolidated tape would be to provide end investors with a truly consolidated overview of the trading opportunities available in the Union, including small regulated markets and lower trading costs through increased cross-border competition, thereby increasing the overall domestic and international attractiveness of Union capital markets, and fostering their growth, in line with the objectives of the capital markets union. Regardless of the exemption granted to smaller regulated markets under this Regulation from the mandatory contribution of market data to the consolidated tape, a dedicated revenue participation scheme▌ for the consolidated tape for shares and ETFs should be established, in order to incentivise their opt-in to the mandatory contribution scheme, which should remain nonetheless entirely voluntary. In particular, data from trades in the less liquid shares should attract a higher remuneration than their notional trading value would indicate. Whether a share is less liquid should be determined on the basis of the proportion of pre-trade transparent liquidity displayed by the regulated market that admits the less liquid share, relative to the average daily trading turnover in that share.

Removed(24) Given the novelty of the consolidated tape in the context of the EU financial markets, ESMA should be entrusted with providing the European Commission with an assessment of the revenue participation scheme designed to incentivise smaller regulated markets to opt in to the mandatory contribution of market data in the context of the consolidated tape for shares and ETFs. This report should be prepared on the basis of at least 18 months of operation of the CTP and subsequently at the request of the Commission, where deemed necessary or appropriate. The assessment should focus in particular on whether the participation of small regulated markets in the revenue of the CTP is fair and effective in inducing those markets to contributing to the consolidated tape and in safeguarding the role that these markets play in their local financial ecosystem. It is appropriate for that assessment to establish whether the inclusion of those smaller regulated markets in the consolidated tape resulted in an increase in the trading volumes of shares in those regulated markets, a positive effect on the participation of professional and retail investors in the market, and an improvement of the trading conditions for end-investors. The Commission should be empowered to revise the mechanism of allocation by way of a delegated act, where necessary or appropriate.

Removed(25) It is necessary to ensure that consolidated tape providers remedy information asymmetries in the capital markets in a sustainable manner, and to ensure that consolidated tape providers provide consolidated data that are reliable. Consolidated tape providers should therefore be obliged to adhere to organisational requirements and quality of service standards that must be met at all times once they have been authorised by ESMA. Quality standards should cover aspects related to the collection of consolidated core market data, accurate time-stamping of such data at various stages in the delivery chain, collection and administration of market data subscription fees, and allocation of revenue to market data contributors.

Removed(26) In order to safeguard market participants’ continued trust in the operation of a consolidated tape provider, such entities should periodically make a series of public reports concerning compliance with their obligations under this Regulation, in particular on performance statistics and incident reports relating to data quality and systems. Due to the highly technical nature of the substance of the report, ESMA should be empowered to specify the substance, format and timing.

Removed(27) The requirement that trade reports should be made available free of access charges after 15 minutes currently applies to all trading venues, APAs and CTPs. For CTPs, that requirement stands in the way of commercialising the consolidation of the core market data and considerably limits the commercial viability of a potential CTP, since certain potential clients could prefer waiting for the consolidated free data rather than subscribing to the consolidated tape. This is in particular the case for bonds and derivatives that are in general not traded frequently and for which the data has often kept most of its value after 15 minutes. While the requirement to deliver the data for free after 15 minutes should remain in place for trading venues and APAs, it should be abandoned for CTPs to protect its potential business model.

Removed(28) Article 28 of Regulation (EU) No 600/2014 requires that OTC derivatives that are subject to the clearing obligation are traded on trading venues. Regulation (EU) 2019/834 of the European Parliament and of the Council amended Regulation (EU) No 648/2012 of the European Parliament and of the Council to reduce the scope of the entities that are subject to the clearing obligation. In light of the close interconnection between the clearing obligation under Regulation (EU) 648/2012 and the derivatives trading obligation under Regulation (EU) 600/2014, and to ensure greater legal coherence and to simplify the legal framework, it is necessary and appropriate to re-align the derivatives trading obligation with the clearing obligation for derivatives. Without that alignment, certain smaller financial counterparties and non-financial counterparties would no longer be captured by the clearing obligation but continue to be captured by the trading obligation.

Removed(29) Article 6a of Regulation (EU) No 648/2012 provides for a mechanism to temporarily suspend the clearing obligation where the criteria on the basis of which specific classes of OTC derivatives have been made subject to the clearing obligation are no longer met, or where such suspension is considered necessary to avoid a serious threat to financial stability in the Union. Such suspension may, however, prevent counterparties from being able to comply with their trading obligation, laid down in Regulation (EU) 600/2014 because the clearing obligation is a pre-requisite to the trading obligation. It is therefore necessary to lay down that, where the suspension of the clearing obligation would lead to a material change in the criteria for the trading obligation, it should be possible to concurrently suspend the trading obligation for the same class or classes of OTC derivatives that are subject to the suspension of the clearing obligation.

Removed(30) An ad-hoc suspension mechanism is necessary to ensure that the Commission may swiftly react to significant changes in market conditions that may have a material effect on the trading of derivatives and their counterparties. Where such market conditions are present, and upon the request of the competent authority of a Member state, the Commission should be able to suspend the trading obligation, independently from any suspension of the clearing obligation. Such a suspension of the trading obligation should be possible where the activities of an EU investment firm with a non-EEA counterparty are unduly affected by the scope of the EU trading obligation on derivatives and where that investment firm acts as a market-maker in the category of derivatives subject to the trading obligation. The issue of overlapping DTOs is particularly acute when trading with counterparties domiciled in a third-country jurisdiction that applies its own DTO. This suspension would also help EU counterparties remaining competitive on global markets. When deciding upon the suspension of the trading obligation, the Commission should take into consideration the impact of such suspension on the clearing obligation laid down in Regulation (EU) No 648/2012.

Removed(31) Open access provisions for exchange-traded derivatives reduce attractiveness to invest in new products as competitors may be able to get access without the upfront investment. The application of the open access regime for exchange-traded derivatives, laid down in Article 35 and 36 of Regulation (EU) No 600/2014, may thus limit competitiveness in these products, by removing incentives for regulated markets to create new exchange-traded derivatives. It should therefore be laid down that that regime should not apply to the CCP or trading venue concerned in respect of exchange-traded derivatives, thus fostering innovation and the development of exchange-traded derivatives in the Union.

Removed(32) Financial intermediaries should strive to achieve the best possible price and the highest possible likelihood of execution for trades that they execute on behalf of their clients. To that end, financial intermediaries should select the trading venue or counterparty for executing their client trades solely on the basis of achieving best execution for their clients. It should be incompatible with that principle of best execution that a financial intermediary, when acting on behalf of its clients, receives a fee, a commission or any non-monetary benefit from a third party in exchange for routing client orders for execution by that third party. Investment firms should be therefore be prohibited from receiving such payment or any other non-monetary benefit. This prohibition is rendered necessary in light of the divergent practices by national competent authorities across the Union in their application and supervision of best execution requirements as laid out in Article 27 of Directive 2014/65/EU. For this reason, no further national discretions should be considered acceptable with respect to the rules applicable to the routing of client orders for execution.

Removed(32a) The energy crisis of 2022 has brought to light that the regulatory framework for commodity derivatives trading as set out in Directive 2014/65/EU could be further improved. In particular, the impact of higher and more frequent margin calls and the regulatory status of market participants, the impact of extreme volatility and prices and the impact of third country trade companies are elements that could warrant a review of the commodity derivatives framework. In particular, the impact and the consequences of introducing minimum holding periods for commodity derivatives is an element that deserves further consideration. ESMA should therefore carry out an analysis on whether such minimum holding period could effectively limit the volatility on derivatives markets without negatively impacting the functioning of those markets.

Removed(33) The Commission should adopt the draft regulatory technical standards developed by ESMA regarding the precise characteristics of the deferral regime for non-equity transactions, regarding the provision of information on a reasonable commercial basis, regarding the application of the synchronised business clocks by trading venues, systematic internalisers, APAs and CTPs and regarding characteristics of the public reporting obligation of the CTP. The Commission should adopt those draft regulatory technical standards by means of delegated acts pursuant to Article 290 TFEU and in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.

Removed(34) Since the objectives of this Regulation, namely to facilitate the emerging of a consolidated tape provider cross markets for each asset classes and to amend certain aspects of the existing legislation in order to improve transparency on markets in financial instruments but also to further enhance the level playing field between regulated markets and systematic internalisers, as well as enhance the international competitiveness of the Union’s capital markets, cannot be sufficiently achieved by the Member States, but can rather, by reason of its scale and effects, be better achieved at the Union level, measure should be adopted at Union level, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union. In accordance with the principle of proportionality, as set out in that Article, this Regulation does not go beyond what is necessary in order to achieve those objectives. This Regulation furthermore respects the fundamental rights and observes the principles recognised in the Charter, in particular the freedom to conduct a business and the right to consumer protection,

RemovedHAVE ADOPTED THIS REGULATION:

Removed(1) Article 1 is amended as follows:

Removed(a) in paragraph 1, the following point (i) is added:

Removed(h) the scope of multilateral trading.’;

Removed(b) paragraph 3 is replaced by the following:

Removed‘3. Title V of this Regulation shall also apply to all financial counterparties referred to in Article 4a(1), second subparagraph, of Regulation (EU) No 648/2012 and to all non-financial counterparties referred to in Article 10(1), second subparagraph, of that Regulation.’;

Removed(c) the following paragraph 7a is inserted:

Removed‘7a. All multilateral systems shall operate either in accordance with the provisions of Title II of Directive 2014/65/EU concerning MTFs or OTFs, or the provisions of Title III of that Directive concerning regulated markets.

RemovedAll investment firms which, on an organised, frequent, systematic and substantial basis, deal on own account when executing client orders outside a regulated market, an MTF or an OTF shall operate in accordance with Title III of this Regulation.

RemovedWithout prejudice to Articles 23 and 28, all investment firms concluding transactions in financial instruments which are not concluded on multilateral systems or systematic internalisers shall comply with Articles 20, 21, 22, 22a, 22b and 22c, of this Regulation.’;

Removed(2) in Article 2, paragraph 1 is amended as follows:

Removed(a) point (11) is replaced by the following:

Removed‘(11) ‘multilateral system’ means any system or facility in which multiple third-party buying and selling trading interest in financial instruments are able to interact in the system;’;

Removed(aa) the following point (16a) is inserted:

Removed‘(16a) ‘designated reporting entity’ means an investment firm responsible for making information on transactions public through an APA in accordance with Articles 20(1) and 21(1);’;

Removed(ab) point (17) is amended as follows:

Removed(a) in point (a), the following point is added:

Removed‘(iiia) the issuance size for corporate bonds;’;

Removed(b) point (b) is replaced by the following:

Removed‘(b) for the purposes of Articles 4, 5 and 14, a market for a financial instrument that is assessed according to the following criteria:

Removed(i) the market capitalisation;

Removed(ii) the average daily number of transactions in those financial instruments, in particular, the fact that a financial instrument is traded daily;

Removed(iii) the average daily turnover for those financial instruments;’;

Removed(b) the following point (34a) is inserted:

Removed‘(34a) ‘market data contributor’ means a trading venue, an APA, or, for the purpose of pre-trade transparency for shares, an investment firm, operating a systematic internaliser;’;

Removed(c) point (35) is replaced by the following:

Removed‘(35) ‘consolidated tape provider’ or ‘CTP’ means a person authorised in accordance with Title IVa, Chapter 1 of this Regulation to provide the service of collecting market data ▌from market data contributors, and of consolidating those data into a continuous electronic live data stream providing regulatory data and core market data ▌and of providing them to user of market data;’;

Removed(ca) point (36a) is replaced by the following:

Removed‘(36a) ‘data reporting services provider’ means a person referred to in points (34), (35) and (36) and a person referred to in Article 27b(2);’;

Removed(d) the following points (36b) ▌, (36c) and (36d) are inserted:

Removed(36b) ‘core market data’ means:

Removed(a) all of the following data on equities:

Removed(i) for lit continuous trading protocols, the prices of the five best bids and offers with corresponding volumes available at those prices;

Removed(ia) for auction systems, the price at which the trading algorithm would be best satisfied and the volume potentially executed at that price by participants in that system;

Removed(ii) for all price-forming trades across all trading mechanisms, the transaction price and volume executed, the transaction time, the trading protocol, applicable waivers and deferrals;

Removed(iii) the intra-day auction information;

Removed(iv) the end-of-day auction information;

Removed(v) the market identifier code identifying the execution venue;

Removed(vi) the standardised instrument identifier that applies across venues;

Removed(vii) the timestamp information on all of the following:

Removed- the venue’s time of execution of the trade or of an amendment to the best bid or offer price or volume, an amendment to the indicative price or volume, and amendment to the trading status of an instrument;

Removed- the venue’s time of publication of the elements listed in the first indent;

Removed- any change to the trading status of an instrument or segment;

Removed- the receipt of market data by the consolidated tape provider;

Removed- the dissemination of consolidated market data to subscribers by the consolidated tape provider;

Removed(viii) the trading protocols and the applicable waivers or deferrals;