Changes from report parliamentary committee draft to plenary report

RemovedThe rapporteur believes that the problems identified by the Commission with the practices related to the so-called payments for order flows (PFOF) are symptomatic of a broader issue related to the best-execution regime. In particular, the way in which the best-execution requirements under Art. 27 of MiFID are worded has led to widely divergent supervisory interpretations, of which PFOF is the starkest example. This has led to increasing opportunities for regulatory arbitrage across borders, contrary to the objectives of a CMU.

AddedOn the basis of that assessment and taking into account the goals of the capital markets union, the Commission is empowered to adopt delegated acts in accordance with Article 50 to amend this Regulation by extending the requirements of this Article as set out in the first subparagraph.’;

RemovedIn light of this, while the rapporteur maintains the initial proposal regarding PFOF, the amendments seek to implement changes to the best execution requirements with a view to ensure a harmonised approach to best execution, more transparency and a level playing field across Europe, to the benefits of end-investors. Art. 27 therefore mandates to develop clearer RTS for professional investors, while best-execution requirements for retail investors are brought under MiFIR, Art. 39a.

Added(11c) in Article 26(2), the first subparagraph is replaced by the following:

RemovedFinally, the transparency requirements should be effective and add value for market participants. Measures that in the name of transparency increase the regulatory burden faced by venues and investments firms without providing value to the investors should be removed - as it is the case for the so-called RTS 27 and 28 reports under Art. 27(3) and (6) of MiFID.

Added‘The obligation laid down in paragraph 1 shall apply to:

Added(a) financial instruments which are admitted to trading or traded on a trading venue or for which a request for admission to trading has been made;

Added(b) financial instruments where the underlying is a financial instrument traded on a trading venue;

Added(c) financial instruments where the underlying is an index or a basket composed of financial instruments traded on a trading venue; and

Added(ca) derivatives subject to the clearing obligation set out in Article 4 of Regulation (EU) No 648/2012 executed outside a trading venue.’;

Added(11d) in Article 26, paragraph 3 is replaced by the following:

Added‘3. The reports shall, in particular, include details of the names and numbers of the financial instruments bought or sold, the quantity, the dates and times of execution, the transaction prices, a designation to identify the parties on whose behalf the investment firm has executed that transaction, a designation to identify the persons and the computer algorithms within the investment firm responsible for the investment decision and the execution of the transaction, a designation to identify the entity subject to the reporting obligation, a designation to identify the applicable waiver under which the trade has taken place and means of identifying the investment firms concerned. Reports on a transaction made at the trading venue shall include a transaction identification code generated and disseminated by the trading venue to both buying and selling members of the trading venue. For transactions not carried out on a trading venue, the reports shall include a designation identifying the types of transactions in accordance with the measures to be adopted pursuant to Article 20(3)(a) and Article 21(5)(a). For commodity derivatives, the reports shall indicate whether the transaction reduces risk in an objectively measurable way in accordance with Article 57 of Directive 2014/65/EU.’;

Added(11e) in Article 26, paragraph 5 is replaced by the following:

Added‘5. The operator of a trading venue shall report details of transactions in financial instruments traded on its platform which are executed through its systems by any member, participant or user not subject to this Regulation in accordance with paragraphs 1 and 3.’;

Added(11f) in Article 26(6), the first subparagraph is replaced by the following:

Added‘In reporting the designation to identify the clients as required under paragraphs 3 and 4, investment firms shall use an ISO 17442 legal entity identifier code established to identify parties that are eligible for the code. The code shall be used to identify eligible parties regardless of their legal status and the way in which they are financed. For parties that are not eligible for the code, a national identifier established to identify parties that are not eligible for the legal entity identifier code shall be used.’;

Added(12) Article 26(9) is amended as follows:

Added▌

Added(a) the first subparagraph is amended as follows:

Added(i) point (c) is replaced by the following:

Added‘(c) the references of the financial instruments bought or sold, the quantity, the dates and times of execution, the transaction prices, the information and details of the identity of the client, a designation to identify the clients on whose behalf the investment firm has executed that transaction, a designation to identify the persons and the computer algorithms within the investment firm responsible for the investment decision and the execution of the transaction, a designation to identify the applicable waiver under which the trade has taken place, the means of identifying the investment firms concerned, the way in which the transaction was executed, data fields necessary for the processing and analysis of the transaction reports in accordance with paragraph 3;’;

Added(ii) point (d) is deleted;

Added(iii) point (e) is replaced by the following:

Added‘(e) the relevant categories of indices to be reported in accordance with paragraph 2;’;

Added(iv) the following points are added:

Added‘(ia) the conditions for linking specific transactions and the means of the identification of aggregated orders resulting in the execution of a transaction; and

Added(ib) the date by which transactions are to be reported.’;

Added(b) the second subparagraph is replaced by the following:

Added‘ESMA shall submit those draft regulatory technical standards to the Commission by ... [3 years after the date of entry into force of this amending Regulation].’;

Added(13) in Article 26, the following paragraph 11 is added:

Added‘11. By [OP insert date 2 years as of date of publication], ESMA shall submit to the Commission a report for the development of an integrated collection of transaction reporting data and for the streamlining of data flows under Article 26 of this Regulation to:

Added(a) reduce duplicative or inconsistent requirements for transaction data reporting, and in particular duplicative or inconsistent requirements laid down in this Regulation, Regulation (EU) 2019/834 of the European Parliament and of the Council*1 , Regulation (EU) 2015/2365, and in other legislation of the financial industry;

Added(b) improve data standardisation and efficient sharing and use of data reported within any Union reporting framework by any relevant competent authority, both Union and national.

AddedWhen preparing the report, ESMA shall, where relevant, work in close cooperation with the other bodies of the European System of Financial Supervision and the European Central Bank.

Added________________________________________________________

Added*1 Regulation (EU) 2019/834 of the European Parliament and of the Council of 20 May 2019 amending Regulation (EU) No 648/2012 as regards the clearing obligation, the suspension of the clearing obligation, the reporting requirements, the risk-mitigation techniques for OTC derivative contracts not cleared by a central counterparty, the registration and supervision of trade repositories and the requirements for trade repositories (OJ L 141, 28.5.2019, p. 42)’;

Added(14) Article 27▌ is amended as follows:

Added(-a) in paragraph 1, first and second subparagraphs are replaced by the following:

Added‘With regard to financial instruments admitted to trading or traded on a trading venue or concluded on a trading venue or where the issuer has approved trading of the issued instrument or where a request for admission to trading has been made, trading venues shall provide ESMA with identifying reference data for the purpose of transaction reporting under Article 26 and the transparency requirements under Articles 3, 6, 8, 8a, 10, 11, 11a, 14, 20 and 21.

AddedWith regard to derivatives, identifying reference data shall be based and further developed on globally agreed international standard used for identifying reference data as derivative identifiers.’;

Added(a) paragraph 3 is amended as follows;

Added(i) the following point (c) is added:

Added‘(c) the date by which reference data are to be reported’.

Added(ii) the following subparagraph is inserted after the first subparagraph:

Added‘When drafting those draft regulatory technical standards, ESMA shall take into account international developments and standards agreed upon at Union or global level, and the consistency of those draft regulatory technical standards with the reporting requirements laid down in Regulation (EU) 2019/834 and Regulation (EU) 2015/2365.’;

Added(14a) Article 27d is amended as follows:

Added(a) the title is replaced by the following:

Added‘Article 27d

AddedProcedures for granting and refusing applications for authorisation for ARMs and APAs’;

Added(b) paragraphs 1-3 are replaced by the following:

Added‘1. The applicant APA or ARM shall submit an application providing all information necessary to enable ESMA, or the national competent authority where relevant, to confirm that the APA or ARM has established, at the time of initial authorisation, all the necessary arrangements to meet its obligations under the provisions of this Title, including a programme of operations setting out, inter alia, the types of services envisaged and the organisational structure.

Added2. ESMA, or the national competent authority where relevant, shall assess whether the application for authorisation is complete within 20 working days of receipt of the application.

AddedWhere the application is not complete, ESMA, or the national competent authority where relevant, shall set a deadline by which the APA or ARM is to provide additional information.

AddedAfter assessing an application as complete, ESMA, or the national competent authority where relevant, shall notify the APA or ARM accordingly.

Added3. ESMA, or the national competent authority where relevant, shall, within six months from the receipt of a complete application, assess the compliance of the APA or ARM with this Title. It shall adopt a fully reasoned decision granting or refusing authorisation and shall notify the applicant APA or ARM accordingly within five working days.’;

Added(15) the following Article 27da is inserted:

Added‘Article 27da Process for the selection of a single CTP for each asset class

Added1. By [OP insert date 3 months as of entry into force], ESMA shall organise a selection procedure for the appointment of the CTP for a five year term. ESMA shall organise a separate selection procedure for ▌ the following asset classes, in the following order:

Added(a) bonds;

Added(b) shares and ETFs;