On March 26, the European Securities and Markets Authority (ESMA) published its final report on proposed amendments to the regulatory technical standards on transparency requirements for trading venues and investment firms in respect of shares, depositary receipts, exchange-traded funds, certificates and other similar financial instruments. The report included amendments regarding transaction execution obligations in respect of certain shares on a trading venue or by a systematic internalizer (RTS1), supplementing the Markets in Financial Instruments Regulation (MiFIR). ESMA also submitted the report to the European Commission (EC) on the same date.

RTS1 provides additional details regarding the transparency requirements for equity instruments, including the quoting obligations for Systematic Internalizers (SIs) under MiFIR. By proposing to amend RTS1, ESMA’s intention is to “level the playing field” between trading venues and SIs, and contribute to an efficient price discovery mechanism.

ESMA has identified over the past few months that further clarity might be needed regarding the concept of “prices reflecting prevailing market conditions,” to avoid SIs benefitting from a competitive advantage compared to trading venues. Therefore, ESMA decided to make clear that SI quotes should reflect the minimum price increments applicable to trading venues in the European Union. This means that SIs’ quotes would only reflect prevailing market conditions where, for instruments subject to the tick size regime, those quotes mirror the minimum price increments applicable to on-venue orders and quotes.

The EC has three months to review the Report and to decide whether or not to endorse the proposed amendments to RTS1.

The report is available here.