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EU and UK MiFIR/MiFID II reforms: Navigating the upcoming data challenges
Transparency thresholds: Two paths, one complexity
The current regime provides a complex system of waivers (for pre-trade transparency obligations) and deferrals (for post-trade transparency obligations). These rely on size thresholds calculated and published annually by the regulators. Namely, these are the Large in Scale (LiS) and the Size Specific to the Instrument (SSTI) thresholds.
Both regulators are phasing out the SSTI thresholds and moving away from a system that requires them to calculate and publish the relevant transparency thresholds. However, this is the only common ground between the two regimes going forward.
In the EU, bonds will be grouped according to certain characteristics and post-trade deferrals will follow a system that combines the issuance size as a proxy of liquidity of the instrument with the size of the transaction. Price and volume information can then be published within specific time schedules that go from 15 minutes to four weeks.
As a result of the new deferral regime, the number of trades below thresholds (hence need to be reported in real-time) will rise significantly, encompassing 87% to 96% of all transactions depending on asset classes.
Similarly, in the UK bonds will be grouped according to certain characteristics (some of which are the same as for the EU rules) but they follow a more granular grouping. The deferral schedules go from 1 day to three months, according to the size of the transaction. Trades below thresholds will be reported in real time.
Importantly, from next year, the growing volume of liquid instruments and trades reportable in real time will be consolidated and disseminated through single data feeds (Consolidated Tapes) in both the EU and the UK, which will add to the significant transformation that non-equity market transparency will undergo in coming months.
The UK has also finalized the transparency regime applicable to derivatives. The first change is that only certain OTC derivatives will be in scope. This will substantially reduce the number of OTC derivatives in scope of transparency rules in the UK.
The deferral schedule is such that price transparency is prioritized over volume transparency. This will result in the price information being allowed a deferral of up to one day and volume deferral to laps at end of the following quarter for volume information for larger trades.
Volume caps: Convergence or disappearance?
Dark pool trading has long been governed by volume caps. Under the EU's MiFIR Review, the Double Volume Cap (DVC), which currently combines a 4% trading venue cap with an EU wide cap of 8% will be replaced with a Single Volume Cap (SVC). Under SVC only 7% of all trading in a stock can be done under waiver without pre-trade transparency requirements. This will be effective as of October 2025.
Meanwhile the UK has already retired volume caps entirely for equities, opting not to replace them.
How Bloomberg can help
As we are transitioning to new regime, market participants will face two key challenges:
The divergence between the EU and UK transparency regimes for non-equity instruments.
Regulators moving away from publishing the relevant transparency information and instead requiring the market to work out the relevant thresholds and parameters according to the new rules.
To help clients understand how to classify non-equity instruments in the EU and UK, Bloomberg is updating its MiFID solution to reflect the changes across both jurisdictions. These changes will be made in alignment with the effective dates of EU and UK MiFIR/MiFID II reforms.
Changes include:
