ESMA Pushes for Sharper Transparency Under MiFIR

The European Securities and Markets Authority (ESMA) has just released its Final Report, outlining key updates to bond market transparency rules under the MiFIR (Markets in Financial Instruments Regulation) Review. These changes, which cover bonds, structured finance products (SFPs), and emission allowances (EUAs), are all about improving transparency while ensuring fairness and protecting liquidity providers from undue risk.

At the heart of these updates is the bond deferral regime, which was originally proposed during ESMA’s public consultations. After conducting fresh data analysis—looking at things like average daily volumes—ESMA has refined the proposal to offer a better balance between transparency and risk protection. The aim? To make sure that trading data is available to everyone without placing undue strain on liquidity providers who make these markets work.

This isn’t just about improving reporting—it’s also about ensuring that liquidity can flow smoothly. With the roll-out of the bond consolidated tape on the horizon, these updates are key to laying the groundwork for a transparent, efficient market where everyone from regulators to market participants can access the information they need.

Defining ‘Reasonable Commercial Basis’ for Market Data

In addition to the deferral regime, the report also takes a deep dive into the new mandate on reasonable commercial basis (RCB) for market data. In short, market data providers will now need to set their fees based on what it costs to produce and share that data, along with a reasonable margin. The goal is to create a fairer, more accessible data environment for everyone in the market. ESMA’s approach here is designed to ensure that no one gets left out of the loop when it comes to accessing critical trading information.

In practice, this means that firms will have clearer guidelines on how they set their data fees, helping ensure that the market data is both accessible and transparent. This change is vital for supporting the smooth implementation of the bond consolidated tape, which will centralize bond market data into a single, easy-to-use source.

With the Final Report now submitted to the European Commission, the next step is for the Commission to review and decide whether to approve the proposed regulatory technical standards (RTS). The Commission has three months to do this, and once they give the green light, firms will need to begin implementing the changes.

But there’s more to come: ESMA is already preparing a consultation paper for early 2025 that will address the transparency mandate for derivatives under Article 11a of MiFIR. This will be another crucial piece of the puzzle as ESMA continues to refine transparency requirements across all markets.

A Familiar Theme: MiFID II’s Push for Sharper Transparency

These updates come on the heels of ESMA’s report on MiFID II, where the authority laid out changes to equity market transparency. Like the bond transparency changes, the focus is on simplifying reporting, reducing redundancies, and making data easier to access and use. The aim in both cases is to strike a better balance between ensuring transparency and minimizing unnecessary burdens on market participants.

For example, just as ESMA is streamlining equity market reporting under MiFID II, the changes to bond markets will also reduce complexity in pre- and post-trade transparency, while offering greater clarity on what needs to be reported. Both efforts show ESMA’s commitment to creating a more efficient, accessible, and fair market environment.

Why This Matters for Compliance Professionals

For those working in compliance, risk management, or trading, ESMA’s updates are a reminder that transparency requirements are here to stay—but they’re getting smarter and more focused. The good news is that many of the changes will help streamline compliance processes by eliminating unnecessary reporting requirements. For example, in the equity markets, firms will see a reduction in redundant reporting obligations, and in the bond markets, the deferral regime has been adjusted to be more practical.

However, there are still important changes to prepare for, especially when it comes to pre- and post-trade disclosures. Firms, especially those involved in bond and equity trading, will need to update their systems and controls to ensure they comply with these new requirements.

These updates aren’t just about making life easier for compliance teams—they’re also about ensuring that everyone, from individual traders to large institutions, has access to the same reliable data. ESMA’s goal is to create a level playing field where no one has an advantage in accessing critical market information.

As the European Commission moves forward with the approval process, now is the time for firms to start fine-tuning their processes and systems. Getting ahead of these changes will help ensure a smooth transition once the new rules are officially in place.

In a market where transparency continues to be a top priority, the coming updates are an opportunity to sharpen systems, improve data access, and make trading more efficient for everyone involved. Stay ahead of the curve now, and your firm will be in a stronger position to meet the evolving regulatory landscape.

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