Update to the Supervisory Statement on the Operation of the MiFID Transparency Regime

On this page we provide an update to the Supervisory Statement on the Operation of the MiFID Transparency Regime post-Brexit.

On 14 March 2019, we published a Supervisory Statement (’statement’). This set out how we would have operated the Markets in Financial Instruments (MiFID) pre and post-trade transparency regime for the secondary trading of financial instruments if the UK had left the European Union (EU) on 29 March at 11pm 2019 without a withdrawal agreement. We are updating that statement to explain how the MiFID transparency regime will work if the UK leaves EU on 31 October at 11pm 2019 without a withdrawal agreement.

Much of the 14 March 2019 statement remains relevant. This statement only covers changes, mainly to dates. This statement takes account of the update that ESMA provided on 7 October 2019 to the statement it issued on 5 February 2019.

This statement and that of 14 March 2019 are intended to help market participants understand our approach to the operation of the MiFID transparency regime if the UK leaves the EU without a withdrawal agreement. We may update the information in this statement from time to time based on market developments and the powers and discretions we have been given to allow us to respond to changes in the market.

FITRS

On 5 March 2019, we published a statement about the operation of our version of ESMA’s Financial Instruments Transparency Reference System (FCA FITRS). In that statement, we said that as of 29 March 2019 FCA FITRS would only provide information on equities and bonds and that firms would need to rely on ESMA’s Transitional Transparency Calculations (TTC) for derivatives.

On 1 November, in addition to equities and bonds, FCA FITRS will also include the following types of derivatives:

  • equity derivatives
  • interest rate derivatives
  • FX derivatives
  • securitisation derivatives
  • commodity derivatives

The remaining instruments will be added in due course. We will communicate this when we are confident about the date at which they can be included in FCA FITRS.

The 5 March statement said that the initial transparency estimates for new equities would be rolled over 6 weeks after they are admitted to trading rather than moving on to figures calculated from data from the first 4 weeks trading. This was because we would not have the system in place to perform these calculations. We are now able to perform those first 4-week calculations and expect to be replacing the initial estimates with those calculations 6 weeks after an equity is admitted to trading.

Double Volume Cap (DVC)

ESMA has said that it will not publish DVC calculations for the first 2 months following the UK leaving the EU without a withdrawal agreement on 31 October 2019. During that period there will be no new suspensions in the UK for any equity instrument, although suspensions introduced before that date will continue to apply. ESMA will resume publishing new suspensions of dark trading in January 2020.

After the UK’s exit from the EU we expect to publish details of any new DVC suspensions, if applicable, for the first time on 8 January 2020. Any such suspensions will take effect from 13 January 2020. Previous suspensions announced by ESMA will continue to apply in the UK after Brexit until 6 months has elapsed from the date of the suspension by ESMA.

Equity transparency

For equity instruments ESMA makes an annual determination of:

  • whether an instrument is liquid
  • the most relevant market in terms of liquidity
  • the minimum size of an order that is above large-in-scale
  • the standard market size

From 1 November we expect to continue to apply, except for the most relevant market in terms of liquidity, the determinations ESMA published in March 2019 and which applied in the EU from 1 April 2019. We expect to publish new annual determinations in early March 2020. These will apply in the UK from 1 April 2020.

After we leave the EU the most relevant market, in terms of liquidity, will be a UK trading venue. The details of the most relevant market, in terms of liquidity, will be published in FCA FITRS.

Non-equity transparency

ESMA published on 18 March 2019 thresholds for the Size Specific to the Instrument (SSTI) and Large in Scale (LiS) for bonds. These have applied from 1 June 2019 in the EU and will apply until 31 May 2020. We expect they will also continue to apply in the UK after Brexit into 2020. We then expect to make a determination in May 2020 of the thresholds that will apply in the UK from 1 June 2020.

ESMA determines the liquidity status of bonds based on trading activity, each quarter. At the time the UK leaves the EU, ESMA’s determination made on 1 August 2019 (based on trading activity in the quarter ending 31 July 2019) will apply until close on 15 November 2019. ESMA will not publish a bond liquidity determination on 1 November 2019. As a result, bonds that would have been within the scope of the calculation (that is, any first issued or admitted to trading on or before 28 August 2019) will be deemed illiquid with effect from 16 November 2019. ESMA will publish its first bond calculation after Brexit on 1 February 2020. This means that between 16 November 2019 and 15 February 2020 the only bonds that will be determined to be liquid in the EU will be newly issued bonds considered liquid based on their type and size of issuance.

To meet the publication obligations of onshored RTS 2 we expect, before 9 November 2019, to publish a confirmation that we have not determined any bonds first issued or admitted to trading on or before 28 August 2019 to be liquid. We will consider relevant information before publishing, by the end of 1 February 2020, information on any bonds we deem liquid in the UK (for the purposes of the transparency regime). If we determine any bonds to be liquid, this determination will apply from 16 February 2020 until 15 May 2020.

The liquidity status of certain non-equity instruments other than bonds is determined annually. However, ESMA did not make a determination in 2019 and the determinations in the transitional transparency calculation (TTC) apply currently in the EU. We will consider whether to make new determinations of liquidity for certain non-equity instruments other than bonds in 2020.

The thresholds relating to the Size Specific to the Instrument (SSTI) and Large in Scale (LiS) for derivatives applying in the EU are those included in the TTC. We expect these will continue to apply in the UK after Brexit. We will consider whether to make and publish new calculations to take effect on 1 June 2020 by early May 2020.

Systematic Internalisers (Sis)

We do not intend to publish data for the purposes of SI calculations before 2020. Firms will continue to be able to opt in to be an SI in particular instruments or classes of financial instruments. We will update the market on this issue in due course.

Tick sizes

We expect that the tick sizes that apply in the EU currently will apply in the UK immediately after Brexit. There is an annual calculation of tick sizes and we expect to publish in early March 2020 the new tick sizes that will apply from 1 April 2020.