A no-deal Brexit may have some significant effects on the thresholds set by European Securities Markets Authority (ESMA) in implementing measures of the second Markets in Financial Instruments Directive (MiFID II), Steven Maijoor, chair of ESMA, noted.
In his speech at the European Financial Forum 2019 in Dublin, Maijoor said: “I appreciate that some of the MiFID II thresholds may need recalibration in the new EU27 Environment.”
“However, this is something ESMA will look at once there is more clarity about a future relationship with the UK and once the effect of, for instance, UK trading venues setting up subsidiaries in the EU27 on overall liquidity has become clearer.”
Maijoor had also explained that the MiFID II transparency framework is founded on a number of thresholds to be specified at ESMA level, to introduce a transparent regime for trading all types of asset classes on a level playing field in the Union.
“One specific example is the double volume cap, which limits the share of trading in dark pools and is meant to preserve the quality of the price discovery mechanism in EU markets.”
According to Maijoor, a no-deal Brexit will not only result in UK market participants losing their passports for accessing the EU, but there will be no further legal basis for the current extensive and granular daily data reporting from the UK to ESMA’s systems under MiFID II.
Maijoor added that in no-deal Brexit, from that date, no new UK data will be collected by ESMA.
He commented: “We also have to consider how UK data submitted before the Brexit date should be treated for future calculations.”
“To provide clarity to market participants, we have explained in a public statement last week that in general, we will gradually phase out the UK data over time.”
“For the double volume cap example, this means that UK data will remain part of ESMA’s calculations for a period of twelve months but its impact will gradually decrease as time passes.”
“We are aware that this is not a perfect solution but we believe it is the least disruptive and most certain for the market in a situation which does not allow for perfect solutions.”
