The London Stock Exchange has responded to CESR's final consultation on proposed level 2 advice for the Markets in Financial Instruments Directive ("MiFID"). The consultation covered best execution and market transparency. In its response, the Exchange has called for clarification of the treatment of negotiated trades on regulated markets to avoid an unnecessary and potentially damaging migration of business away from regulated markets, and a more sensitive approach to the transparency arrangements for illiquid shares.
The advice on negotiated trades is welcome, but further clarification is required over the price condition. In particular the requirement that trades are done "within or at the current spread" must be clarified to mean "within or at the available order book price for that size of trade". To fail to weight the requirement to account for size could force all but the very smallest negotiated trades to be done OTC.
The Exchange continues to have significant concerns about the thresholds being proposed for delayed publication of trades in illiquid securities. The numbers proposed are very high relative to current market practice and the Exchange is concerned that liquidity at this end of the market, which is already scarce, could be damaged. The explanatory text considers leaving responsibility for this section of the market to national discretion and the Exchange urges CESR to pursue adopt this approach.
The original consultation can be found at: www.cesr-eu.org