ESMA Updates Results of Annual Transparency Calculations for Equity and Equity-Like Instruments

On September 23rd, ESMA began to make available the updated annual transparency calculations for equity and equity-like instruments. ESMA has claimed that these updated results will account for and aim to rectify instances of misreporting by a number of reporting entities.

In 2018, the data provided to the Financial Instruments Transparency System (FITRS) for use in these calculations was, in many cases, incorrect. Owing to frequent misreporting, a number of trading venues and approved publication arrangements (APAs) provided inaccurate data to FITRS, meaning that their transparency calculations were not fully accurate.

ESMA cited TP ICAP UK MTF – CASH EQUITY (MIC: IMCE) as one of the primary trading venues guilty of misreporting. In particular, they failed to publish accurate reports ‘related to the determination of the applicable tick-side regime‘.

ESMA’s awareness of inaccurate reporting is not new. In June of 2019, eflow reported an increasing level of frustration on the buy-side caused by an influx of poor-quality data which served to hinder attempts at correct best execution analysis and RTS 27 & 28 reporting.

ESMA has confirmed that ‘these new results reflect late corrections of the underlying data used to perform the calculations by reporting entities’.

What Are The Annual Treansparency Calculations?

The annual transparency calculations are actually comprised of a number of separate, individual calculations. These calculations include the following:

  • The liquidity assessment as per Articles 1 to 5 of CDR 2017/567;
  • The determination of the most relevant market in terms of liquidity (MRM) as per Article 4 of CDR 2017/587 (RTS 1);
  • The determination of the average daily turnover (ADT) relevant for the determination of the pre-trade and post-trade large in scale (LIS) thresholds;
  • The determination of the average value of the transactions (AVT) and the related standard market size (SMS); and,
  • The determination of the average daily number of transactions on the most relevant market in terms of liquidity (ADNT) relevant for the determination of the tick-size regime.
When Will The Changes Take Effect?

ESMA has stated that the updated results of the annual transparency calculations for equity and equity-like instruments will apply from 30 September 2019 until 31 March 2020.

A full list of assessed equity and equity-like instruments can be seen here and here.

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