Steven Maijoor, Chair of the European Securities and Markets Authority (ESMA), yesterday gave an opening statement about the Markets in Financial Instruments Directive (MiFID II) and the related regulation (MiFIR) at the Economic and Monetary Committee in Brussels.

He stated that “MIFID2/MIFIR is the most significant and voluminous piece of Level 2 regulation that ESMA has ever undertaken.”

He focused on three areas:

Non-equity transparency

Regarding the non-equity transparency regime in MiFIR, Maijoor said there are varying opinions in the market on how to establish an ideal system to balance transparency and liquidity. ESMA has been analysing large datasets from trading venues and trade repositories in order to find adequate solutions across the board. But he assured the audience: “We are trying to find reasonable and workable compromises and... we are ready to look at the non-equity rules again, once they are in operation, and react to potential deficiencies.”

Position limits

Maijoor acknowledged there were concerns from market participants regarding position limits. He said: “We need to all bear in mind that the scope of the Level 1 requirements for position limits is extremely wide. The range of contracts captured varies from highly liquid to completely illiquid. This wide variation implies that ESMA has to tread cautiously and a one-size-fits-all approach cannot be the solution.”

Ancillary activity test for non-financial entities

Lastly, he touched on the issue of whether non-investment firms perform investment services as an ancillary activity to their main business. Maijoor said: “ESMA has made the two-pronged test, foreseen in Level 1, a focus of its cost benefit analysis and again you can expect to see some major refinements in the ESMA proposal compared to the text that went out for consultation.”