European Securities and Markets Authority Issues Revised Guidance on Post-Trade Transparency and Position Limits When Transacting on Non-EU Trading Venues

The European Securities and Markets Authority has published two revised Opinions providing further guidance on the post-trade transparency and position limits requirements relating to transactions on non-EU trading venues under the revised Markets in Financial Instruments Directive and the Markets in Financial Instruments Regulation. ESMA first published the Opinions in May 2017.

The first Opinion sets out ESMA's view on determining third-country trading venues for the purpose of transparency under MiFIR. MiFIR requires EU investment firms to make information on transactions in financial instruments traded on a trading venue public. Details of actual transactions must be made public as close to real time as possible – for equities, within one minute of trading, and for non-equities, within 15 minutes (reducing to five minutes in 2020). The Opinion sets out ESMA's view of which transactions between EU and non-EU firms, and which transactions conducted on third-country trading venues should be subject to these post-trade transparency requirements. The Opinion provides objective criteria for identifying those third-country venues that have similar post-trade transparency requirements as EU trading venues. Trades on third-county venues that satisfy the criteria will not need to be made transparent post-trade.

The second Opinion sets out ESMA's revised objective criteria for determining third-country trading venues for the purpose of position limits under MiFID II. MiFID II requires national regulators to establish and apply position limits on the size of a net position in commodity derivatives traded on trading venues and economically equivalent OTC contracts. The limits will apply to the size of a position that a person can hold, including any other positions held on behalf of that person by group entities. Market operators and investment firms will be subject to certain position reporting requirements. The position reporting regime is intended to support the application and enforcement of position limits. ESMA believes commodity derivatives traded on third-country trading venues that meet the criteria in the Opinion should not be considered as OTC trades and hence that the positions resulting from trading those contracts should not count towards the EU position limit regime.

During 2018 ESMA will publish a list of trading venues that meet the criteria and a list of trading venues that do not, for both position limits and post-trade transparency. Those lists will be updated on an ongoing basis.

Neither Opinion is intended to prejudice any equivalence assessment performed by the European Commission under MiFID II/MiFIR, in particular, any equivalence assessment of third-country trading venues for the purposes of the trading obligations for shares and derivatives.

View the Opinion on determining third-country trading venues for the purpose of transparency under MiFID II / MiFIR (ESMA70-154-467).

View the Opinion on determining third-country trading venues for the purpose of position limits under MiFID II (ESMA70-154-466).