ESMA Pushes for Sharper Transparency Under MiFID II

The European Securities and Markets Authority (ESMA) is making moves to fine-tune equity market transparency rules under MiFID II. On December 16, ESMA released its Final Report, laying out targeted changes that aim to simplify pre- and post-trade reporting, reduce redundant obligations, and make equity data more useful and accessible.

For financial firms and compliance teams, the message is clear: transparency isn’t going away, but ESMA wants to make it smarter and less painful. ESMA’s proposal focuses on several critical areas where clarity has been lacking or inefficiencies have piled up. Here’s what stands out:

1. Liquid Markets: A Clearer Definition: ESMA is refining what qualifies as a “liquid market” for equity instruments. The goal? Remove the guesswork for firms trying to figure out when transparency obligations apply. This should bring more certainty to day-to-day compliance.
2. Pre-Trade Transparency - Fewer Gaps, More Detail: Firms will face stricter requirements on what they must disclose before trades happen. This change also lays the groundwork for the much-anticipated equity consolidated tape, which will centralize trading data across European markets into one streamlined source.
3. Systematic Internalisers - New Rules for Quoting: For firms acting as Systematic Internalisers (SIs)—essentially executing client trades internally—ESMA is recalibrating quoting size thresholds. This means SIs will need to ensure their systems align with the updated standards for pre-trade obligations.
4. Post-Trade Transparency: Cleaner and Clearer: ESMA is adding new flags to improve post-trade reports, making equity trading data easier to interpret and more useful for regulators and market participants alike.
5. Less Redundancy in Reporting: In a practical win for firms, ESMA is cutting some duplicate reporting requirements. Moving forward, transparency calculations will rely on transaction data already submitted under MiFIR Article 26, saving firms some effort and resources.

Why It Matters

If you’re working in equity markets—whether on the trading floor, in compliance, or managing risk—these changes hit on two major themes - clarity and efficiency.

For compliance professionals, the reduced reporting burden is a welcome shift. Redundant processes can slow firms down and increase the risk of errors, so ESMA’s push to streamline reporting is a step in the right direction.

That said, the focus on sharper pre-trade and post-trade disclosures will require attention. Firms—especially Systematic Internalisers—will need to ensure their systems and controls are ready for the updated requirements. This means reviewing how data is reported, making system updates where necessary, and ensuring teams are clear on the changes.

ESMA has submitted the Final Report, along with its draft technical standards, to the European Commission for adoption. Once approved, firms will need to begin implementation. And there’s more to come. ESMA has already flagged that early 2025 will bring proposals for updates to MiFID II’s volume cap mechanism, which regulates trading in dark pools and other less-transparent venues.

ESMA’s latest updates are less about overhauling MiFID II and more about making it work better. For firms, the proposed changes should lead to clearer rules and less duplication—but they’ll still require proactive adjustments to processes, systems, and controls.

In a market environment where transparency and efficiency remain top priorities, the smart move is to start preparing now. Fine-tuning systems and staying ahead of upcoming proposals will help firms avoid scrambling when the changes officially land.

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