By Huw Jones
LONDON, Feb 4 (Reuters) - The European Union's markets
watchdog has proposed stricter conditions on share trading off
an exchange and on "dark pools", saying the bloc's securities
rules have failed to reduce their influence.
In a public consultation paper it also proposed making clear
that EU investors could trade UK shares in London in a move to
reduce the likelihood of Britain retaliating.
The EU's MiFID II securities rules introduced in 2018 sought
to push more share trading onto transparent exchanges to better
protect investors, away from dark pools where users have some
degree of anonymity.
The European Securities and Markets Authority (ESMA) said on
Tuesday that MiFID II has only been partially successful, with
tweaks needed to tackle some significant remaining challenges.
ESMA proposed limiting waivers from having to flag the
prices at which users intend to trade at on dark pools.
Conditions for granting waivers could also be made tougher.
The watchdog is also proposing increased transparency
requirements for "systemic internalisers", a reference to share
trading inside banks between clients.
RETALIATION LESS LIKELY
In a step that could make it easier for EU investors to
continue using UK trading platforms, ESMA said it was proposing
to clarify where EU investors can trade non-EU shares.
Currently EU investors can be obliged to trade foreign
shares on platforms in the EU where available, even if there is
little volume.
Britain left the EU last week but has a business-as-usual
transition deal until the end of December, after which UK
platforms will need permission from the bloc to directly serve
EU investors.
Permission is now being assessed under the EU's
"equivalence" system that determines if UK securities rules are
as robust as those in the bloc.
UK platforms like Turquoise, Aquis and Cboe Europe have
opened units in Amsterdam and Paris to trade EU shares in case
London gets cut off from the bloc.
ESMA said it makes sense to restrict the ability of EU
investment firms to trade EU listed shares on "third country" or
non-EU platforms that are not "equivalent".
"However, with respect to non-EU shares, it appears less
appropriate to limit by default the access to third country
venues", ESMA added.
ESMA and Britain's Financial Conduct Authority clashed over
where shares could be traded under a no-deal Brexit, prompting
ESMA to rein back a requirement for UK shares to be traded
inside the bloc and not in London.
The FCA held back from retaliating and ESMA's proposed
clarification could help smooth relations.
ESMA said its proposed clarification would make it "less
likely that third countries will impose a trading obligation to
EU shares".
(Reporting by Huw Jones; Editing by Steve Orlofsky)
