Legal development

EU MIFIR Review: Next steps

30 August 2024

The MiFIR review has introduced a number of changes for investment firms. ESMA will be consulting over the next few years on supporting rules.

What has happened?

ESMA has been publishing a range of consultations in response to its various mandates under Updated MiFIR:

Consultation paper on technical standards related to Consolidated Tape Providers and DRSPs, and assessment criteria for the CTP selection procedure (first consultation paper).
Consultation Paper on RTS 2 on transparency for bonds, structured finance products and emission allowances, draft RTS on reasonable commercial basis and review of RTS 23 (second consultation paper).
Consultation Paper on equity transparency (RTS 1 and CDR 2017/567), volume cap (RTS 3) circuit breakers (new RTS), SI (new ITS on SI notification), the equity CTP and the flags for non-equity transparency (RTS 2) (third consultation paper).

ESMA has also consulted on order execution policies (see our briefing here).

What is the broader context?

Firms subject to MIFID will have a lot to grapple with in the next couple of years. The Directive amending MiFID II (Updated MIFID) was finalised along Updated MiFIR and came into force in March 2024 (see our briefing here).

Updated MiFIR applied from 28 March 2024. There exists a transitional provision and several aspects need to be supplemented by EU delegated acts in order to be fully operational (this means that in some cases, the existing rules, together with the accompanying ESMA calculations continue until the revised delegated acts/new delegated acts are finalised). Guidance was produced by European Commission and ESMA.

ESMA has been consulting on the various mandates it has in relation to updated MIFIR, which will require developing new RTS/ITS as well as amending existing ones. Some of these empowerments fall under different legislative timelines, with some mandates related to pre-trade transparency for all non-equity instruments having a deadline of 12 months after entry into force, while the post-trade transparency for bonds, SFPs and emission allowances is 9 months after entry into force (and 18 months after entry into force in respect of derivatives).

What can firms expect in the near future?

A lot of output from ESMA in the form of further consultations, final reports and statements in relation to MiFIR. Those in charge of MIFID implementation will need to keep a look out to ensure smooth transition and preparation of systems and procedures. For example, ESMA recently issued a statement in preparation of the new DPE register regime and its go-live date September 2024. The date for ESMA to set up the public register of all DPEs and to start publishing is 29 September 2024. As of 3 February 2025, registered DPEs that are party to a transaction will make the transaction public via an APA and the current regime of relying on SIs to make transactions public via an APA is expected to stop applying.

ESMA chair, Verena Ross, recently set out what firms can expect in the next few months (although this may be subject to some revision):

The EU single rulebook will flag in respect of each article amended by the MiFIR review, whether the amended article will only apply at a later date and provide information on the application of related delegated acts during the transition period.
ESMA is aiming to adopt the Final Reports linked to its MiFIR II consultations by the end of 2024 in respect of commodity derivatives and bond transparency.
ESMA is to consult on transaction reporting and order book record-keeping in October 2024, with final reports expected in March 2025.
RTS 2 review with specific focus on transparency for derivatives and package orders by end of 2024 or beginning of 2025. Final reports for these expected by end of 2025.

The amendments in respect of pre-trade and post trade transparency requirements and the CTP will require changes to systems and operational processes to ensure that new flags are integrated, new trade transparency fields/data are incorporated and relevant policies are updated. SIs will also need to prepare for the proposed electronic format for SI notifications. Investment firms intending to become DPEs will also need to review relevant proposals and statements from ESMA.