Update on MiFID II and MiFIR review

Gabriela Tsekova
Senior Manager, FS Regulations, PwC Switzerland

The European Parliament and the Council have debated the amendments in the legislative proposals revising the Markets in Financial Instruments Directive (MiFID) and the Markets in Financial Instruments Regulation (MiFIR). While many issues have been agreed, a few are still subject to intensive discussions.

Background

On 25 November 2021, the European Commission published the long-awaited proposals amending MiFID II and MiFIR. The proposals are the output of the MiFID II review. Following an extensive consultation and in light of the market developments in the context of the coronavirus pandemic, the European Commission proposed the establishment of an EU-wide consolidated tape for shares, bonds, exchange-traded funds (ETFs) and derivatives, as well as making targeted changes to market structure, so as to increase transparency and strengthen the competitiveness of EU financial markets.

The Commission’s proposals are subject to the ordinary legislative procedure. Thus, the European Parliament and the Council are examining the proposals.

Council discussion

On 17 and 21 November, two Council working group meetings on MiFIR/MIFID took place. The Member States found an agreement on the vast majority of the topics such as consolidated tape, transparency and volume cap. However, no breakthrough could be reached regarding the proposal for the Payment for Order Flow (PFOF) presented by the Czech Presidency. Most of the Member States couldn’t give a definitive answer on the support or objection stressing that insufficient time was given to the experts to consider the proposal and the fact it is deviating from the previous ones. It has been stressed that the European Best Bid and Offer (EBBO) will be based on the information in the consolidated tape, but it will cause difficulties to apply in the Member States which decide to opt out from the consolidated tape regime. This in turn will lead to an unlevel playing field across the European Union. In addition, it has been pointed out that the proposed deviation of 2% is too big.

Despite the still open issues related to the PFOF, the Czech Presidency intends to conclude the file in the Council by the end of the year. Thus, the next and potentially last meeting of the working group scheduled for 8 December is expected to be decisive.

European Parliament discussions

On 17 November, the Committee on Economic and Monetary Affairs (ECON) debated the amendments tabled to the draft reports on the MiFID II and MiFIR review, which were released in August 2022. The main topics discussed by the rapporteurs referred to PFOF, inducements and consolidated tape. It has been agreed to discuss the measures related the energy crisis, circuits breakers and passion limits at a later stage.