Pre- and post-trade transparency for equities is not new, the extension of the regime for non-equity instruments such as Bonds, however, is.
MiFIR tightens the existing equity regime, requiring post-trade publication within 1 minute instead of 3 and for permitting delayed publication only until the end of the trading day, instead of for up to four days. This updated regime also extends equity reporting requirements to ‘equity-like’ instruments including depositary receipts, ETFs, certificates and warrants.
Transparency in the non-equity markets (bonds, derivatives, structured finance products and emissions allowance markets) will involve significant change in the way fixed income and derivative market participants operate and interact. Post-trade transparency is required within 15 minutes of execution, which will decrease to 5 minutes from January 2020.
The obligation to make trades public will always fall to the selling MiFID Firm, except where the buyer is a systematic internaliser in relation to the specific instrument traded. Previously, where it was agreed in advance by two MiFID firms transacting with one another, it was possible to dis-apply what is commonly known as the ‘reporting hierarchy’, which usually resulted in brokerage firms assuming responsibility for all post-trade reporting obligations, however under MiFIR this will no longer be possible.
MiFIR also requires, in respect of equity, equity-like and non-equity instruments that regulated markets, MTFs and OTFs publish their bid and offer prices and ‘depth of trading interest’ information. Actionable indications of interest will also require disclosure. This data will have to be published on a continuous basis during normal trading hours. Systematic internalisers are also caught under the pre-trade transparency regime and will be required, where there is a liquid market, to make public firm quotes in the equity and equity-like instruments they deal in. This however is only applicable up to standard size, and where there is no liquid market the information must be disclosed upon client request.