Our Secondary Markets and Legal Expert Groups have contributed to our response to ESMA's Discussion Paper on MiFID/MiFIR draft RTS/ITS. We have focused our response to the discussion paper on the questions related to best execution (publication of data related to the quality of execution by trading venues for each financial instrument traded), pre- and post-trade transparency and tick sizes.
Regarding the publication of data related to the quality of execution by trading venues for each financial instrument traded, we disagreed with market makers being categorised as execution venues, specifically in relation to equity markets, as to do so would mean duplication of effort in collation and publication of data and may generate increased costs with no added liquidity or perceived benefits. This situation would ultimately be harmful to small and mid-size quoted companies.
We considered that the proposal for the publication of data has disregarded quote driven markets, which are a model used extensively for the trading of less liquid, small and mid-size quoted company securities and one of the trading models recognised by MiFIR. We supported that the model needs to be designed to capture all trading mechanisms and allow identification of where liquidity is adequate to ensure the best execution quality for the instrument.
Regarding pre- and post-trade transparency, we mentioned that there is a flaw in the calculations of the ADT groups, as ESMA’s calculations have disregarded a significant number of small and mid-size quoted company shares throughout Europe which are admitted to trading on a MTF. We supported the recalculation of the data in order to determine whether the ADT groups are appropriately calibrated.
We argued that all of ESMA’s options in relation to the deferral periods for large in scale transactions could lead to significant degradation of the market in small and mid-size quoted company securities, likely causing significant harm to the wider sector and market.
Regarding tick sizes, we supported that there should be a minimum price differentiation, small enough to allow a competitor to top or beat that price, and which should be inclusive of small and mid-size quoted company securities.