MiFID II and MiFIR: ESMA Updates

ESMA's latest data release sheds light on key aspects of MiFID II and MiFIR frameworks, affecting financial institutions within the EU. The changes impact bond liquidity, systematic internalisers, and CTPs, urging firms to adapt to foster market transparency and investor confidence.

MiFID II and MiFIR: ESMA Updates
EU Financial Regulation

MiFID II and MiFIR: ESMA on Liquidity, Systematic Internaliser Calculations and CTP Calculations

Source: European Securities and Markets Authority Keywords MIFID II MIFIR

The European Securities and Markets Authority (ESMA) has released fresh quarterly data in three key areas: bond liquidity, systematic internaliser calculations, and consolidated tape provider (CTP) calculations. These are all integral parts of the Markets in Financial Instruments Directive II (MiFID II) and Regulation (MiFIR) frameworks. The evaluation of bond liquidity indicated that, for this quarter, there are 1,105 bonds classified as liquid and currently under the transparency requirements of MiFID II. The assessment was based on the daily average trading activity and the percentage of days traded per quarter. The new data also includes systematic internaliser calculations for various instruments and the CTP calculations under MiFID II and MiFIR. ESMA also revealed completeness indicators related to bond liquidity data, with the transparency requirements for bonds considered liquid to be applied from August to November 2023.

MiFID II and MiFIR Updates: ESMA's Latest Data Release and Its Impact on EU's Financial SeĆ²ctor

In the ever-evolving landscape of financial regulation, staying ahead of regulatory changes is crucial for financial institutions operating within the European Union. The European Securities and Markets Authority (ESMA) has recently revealed its latest quarterly data, shedding light on three pivotal areas: bond liquidity, systematic internaliser calculations, and consolidated tape provider (CTP) calculations. All of these form integral components of the Markets in Financial Instruments Directive II (MiFID II) and Regulation (MiFIR) frameworks.

The most recent evaluation of bond liquidity, an integral component of this update, has identified 1,105 liquid bonds that presently fall under the MiFID II transparency requirements for the approaching quarter. This vital information could significantly influence trading strategies and liquidity management for a variety of financial entities, ranging from banks and credit institutions to investment firms and asset management companies.

Meanwhile, ESMA's revised systematic internaliser calculations offer indispensable insights for brokerage firms and systematic internalisers. The inclusion of these calculations requires such institutions to reassess their operations, ensuring they align with these latest regulatory adjustments.

The impact of this data release also extends to consolidated tape providers (CTPs). With new CTP calculations part of ESMA's latest report, these providers will need to revise their existing systems to maintain regulatory compliance.

On a broader scale, ESMA's release sets the stage for increased market transparency and investor confidence, particularly within the bond market. The upcoming transparency requirements for liquid bonds, slated to take effect from August to November 2023, will likely play a significant role in shaping the bond market's future. Similarly, the systematic internaliser data, coupled with the mandatory systematic internaliser test by August 2023, will ensure adherence to fair trading practices, thereby cultivating a more transparent trading environment.

Additionally, the inclusion of over-the-counter (OTC) trading data in ESMA's release presents potential enhancements for market surveillance and risk management strategies. The release of CTP data could also fuel competition and innovation, particularly beneficial for new entrants to the market.

However, amid these promising developments, the risk of non-compliance looms. Financial institutions must remain vigilant, regularly monitoring ESMA updates related to MiFID II and MiFIR. Adapting internal systems and procedures, training employees on regulatory changes, and conducting rigorous reporting and auditing are critical to maintaining compliance. Consulting with legal and regulatory experts can further ensure that firms are well-equipped to navigate these regulatory updates.

ESMA's latest data release underlines the dynamic nature of financial regulation within the EU. While it promises improvements in market transparency and investor confidence, it also underscores the need for continuous adaptability and vigilance among financial institutions. As we look forward to the application of these new requirements in August 2023, the onus falls on financial institutions to maintain robust compliance strategies, staying ahead in the fast-paced world of financial regulation.

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ESMA publishes data for quarterly bond liquidity assessment, the systematic internaliser calculations and the CTP calculations

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