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DRAFT REPORT (COM(2021)727 – C90440/2021 – 2021/0385(COD))

On the proposal for a regulation of the European Parliament and of the Council amending Regulation (EU) No 600/2014 as regards enhancing market data transparency, removing obstacles to the emergence of a consolidated tape, optimising the trading obligations and prohibiting receiving payments for forwarding client orders

ECON-PR-731644

Committee on Economic and Monetary Affairs · Rapporteur: Danuta Maria Hübner

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Written by a language model from the full text only; every figure comes from the text. The paragraph links open the paragraph a statement rests on — check the text itself before relying on it.

The rapporteur's draft report sets out Parliament's position on the Commission proposal to amend Regulation (EU) No 600/2014 on markets in financial instruments. It proposes rules for a consolidated tape, changes to market data transparency, trading obligations and payments for forwarding client orders. It would have ESMA select and authorise consolidated tape providers, starting with bonds, then shares and ETFs, then derivatives, with each selection starting no later than six months after the previous one. It would suspend the double volume cap on dark trading for five years, let ESMA set the threshold for using the reference price waiver at no more than twice the standard market size, and harmonise deferrals for non-equity transactions. It would create a 'designated reporting entity' status to decouple reporting from systematic internaliser status, and require each transaction to be made public once through a single APA. It would ban investment firms from receiving fees or commissions from third parties for forwarding client orders, and move best-execution requirements for retail clients into the regulation.

Committee position. The rapporteur proposes to amend the Commission proposal to simplify transparency rules, introduce a phased consolidated tape, suspend the double volume cap, harmonise non-equity deferrals, create a designated reporting entity regime, and ban payments for forwarding client orders while strengthening best-execution rules for retail clients.

Key points

  1. Parliament's position would amend Regulation (EU) No 600/2014 to enhance market data transparency, remove obstacles to a consolidated tape, optimise trading obligations and regulate payments for forwarding and execution of client orders.
  2. ESMA would periodically organise competitive selection procedures for a single consolidated tape provider per asset class, prioritising bonds, then shares and ETFs, then derivatives, with each process starting no later than six months after the preceding one.
  3. The reference price waiver would apply only to orders at or above a size set by ESMA, not exceeding twice the standard market size, and the double volume cap on dark trading would be suspended for five years.
  4. Systematic internalisers would have to publish firm quotes at a minimum size set by ESMA, not exceeding twice the standard market size, and would not be allowed to match at midpoint below that size.
  5. The deferral regime for non-equity transactions would be harmonised, with price deferred at most until the end of the trading day and price and volume of very large transactions masked for no more than four weeks.
  6. A 'designated reporting entity' status would be created, with ESMA keeping a register, and each transaction would be made public once through a single APA.
  7. Regulated markets whose average daily trading volume of shares is less than 1% of the Union average would be exempt from providing market data to the consolidated tape, but could opt in and receive a higher share of revenue.
  8. Market data contributors would receive remuneration only through revenue sharing, and retail investors would have access to the consolidated tape free of charge or for a nominal annual fee.
  9. Investment firms acting on behalf of clients would be banned from receiving any fee, commission or non-monetary benefit from third parties for forwarding client orders, with a delegated act to specify covered market practices.
  10. ESMA could request the Commission to temporarily suspend the derivatives trading obligation for certain or all derivatives, including for dealer-to-dealer platforms linked to Union CCPs, for periods not exceeding three months, renewable.
  11. Market data would have to meet quality standards specified by ESMA in regulatory technical standards, and a single reasonable commercial basis provision would apply to all data contributors, including consolidated tape providers.
  12. The share trading obligation would cover shares with an EEA ISIN, and the exemption for non-systematic, ad hoc or irregular and infrequent trades would be removed.

Who is affected

  • Trading venues, systematic internalisers and APAs would face new transparency, reporting and data contribution rules.
  • Investment firms, especially smaller ones, would benefit from decoupled reporting obligations and a designated reporting entity regime.
  • Smaller regulated markets could be exempt from mandatory data contribution but may opt in for a higher revenue share.
  • Retail investors would gain access to the consolidated tape free of charge or for a nominal fee and stronger best-execution rules.
  • Consolidated tape providers would be selected and authorised by ESMA and subject to organisational and revenue redistribution requirements.

Figures and deadlines

  • The double volume cap on dark trading would be suspended for at least five years.
  • The price of a non-equity transaction could be deferred at most until the end of the trading day.
  • The price and volume of very large non-equity transactions could be masked for no more than four weeks.
  • The reference price waiver threshold would not exceed twice the standard market size.
  • Systematic internalisers' minimum quoting size would not exceed twice the standard market size.
  • Regulated markets with less than 1% of the Union's average daily trading volume of shares would be exempt from providing market data to the consolidated tape.
  • ESMA would publish dark trading data within seven working days of the end of each calendar month.
  • ESMA would provide the Commission with an opinion after 24 months of full operation of the consolidated tape for shares and ETFs.

Legal basis: Article 294(2) and Article 114 of the Treaty on the Functioning of the European Union.