EU markets watchdog offers Brexit olive branch over access to UK trading platforms
The European Union’s markets watchdog is considering imposing stricter conditions on off-exchange share trading, and has also proposed making it easier for EU investors to use UK trading platforms after the Brexit transition period ends.
In a consultation paper published today, The European Securities and Markets Authority (ESMA) said that EU securities rules had failed to reduce the influence of so-called dark pools — private trading exchanges or forums.
The bloc’s Mifid II rules, introduced in 2018, sought to push more share trading onto transparent exchanges to better protect investors, away from dark pools where users have some degree of anonymity.
But ESMA said today that Mifid II has only been partially successful in achieving this, and that changes were needed to tackle remaining transparency challenges.
“While we consider that [Mifid II] has been partially successful, we also see some significant remaining challenges which should be tackled by a targeted review of the legislation,” said ESMA chair Steven Maijoor.
The watchdog proposed limiting waivers from having to flag the prices at which users intend to trade securities on dark pools, as well as tightening conditions for granting waivers.
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ESMA is also proposing increasing transparency requirements for “systemic internalisers” — share trading inside banks between clients.
In a move that could make it easier for EU investors to continue using UK trading platforms once the post-Brexit transition period ends in December, the regulator said it was proposing to clarify where EU investors can trade shares from outside the bloc.
Currently, EU investors can be obliged to trade non-EU shares on platforms within the bloc when available. After the transition period ends, UK platforms will need permission from the EU to directly serve its investors.
ESMA said that while it makes sense to restrict the ability of EU investment firms to trade EU-listed shares on non-EU countries that are not “equivalent”, but added: “However, with respect to non-EU shares, it appears less appropriate to limit by default the access to third country venues”.
The watchdog has previously clashed with the Financial Conduct Authority over where shares could be traded if Britain left the EU without a deal, prompring ESMA to remove a requirement for some UK shares to be traded inside the bloc and not in London.
ESMA said today that its proposed clarification would make it “less likely that third countries will impose a trading obligation to EU shares”.