ABI Response to the CESR Consultation on Equity Markets

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1 ABI Response to the CESR Consultation on Equity Markets The ABI s Response to ref CESR/ Introduction The Association of British Insurers (ABI) is the voice of the insurance and investment industry. Its members constitute over 90 per cent of the insurance market in the UK and twenty per cent across the EU. The UK insurance industry is the largest in Europe and the third largest in the world. Figures published last year show that our members are responsible for investments of 1.5 trillion. They also manage sizeable assets for third party clients. General comments Thank you for the opportunity to respond to this consultation paper. Our members as institutional investors have for some time now called for a review of the MiFID equity markets regime. We are therefore pleased that CESR has been asked to provide advice to the European Commission and agree with the areas chosen for review. We are also very supportive of many of the proposals outlined in the paper. As a general point, we would ask the European regulators to explicitly take into account the interests of institutional investors. Arguably, those interests should take precedence over views of intermediaries. Capital markets exist to bring together issuers looking to raise capital with investors willing to provide it either retail investors or those acting as their agents such as our members. Whether those market participants benefit from a particular piece of regulation should be the ultimate test of how successful the European legislators have been. This principle should inform the priorities for review. For the ABI members, the key one is the failure of market forces to provide good quality post-trade data. They agree that ths needs to be tackled by regulatory action. This has been one area where the competition between venues as envisaged in MiFID, and the innovation it brought about, did not benefit the end-investors. We would urge CESR to recommend the Commission adopts a proposal to build a regime based on clear standards, with reporting done via APAs. We also believe that there should be a pan-european consolidated tape, run on a not-for-profit basis. Also, much time and effort has been directed towards helping retail investors. We are of course supportive of this as a policy objective. However, there should also be an acknowledgement that a great deal of retail investors money is managed by institutional investors portfolio managers such as our members. Although they need investor protection too particularly as they are present in the market as agents of those underlying investors and never trade on their own account their needs are sometimes very different. This is the case across the board but is particularly acute when it comes to trading. Because of the amount of money they manage, institutional investors often place very large orders. This means that their key concern is to find sufficient liquidity to

2 execute their trades and minimise the market impact of doing so. Overall and as mentioned above they support fully transparent markets in which they have confidence to invest. However, the issue is sometimes more finely balanced: for investors trading in size, total transparency is not always a panacea. Some kind of hidden liquidity has always existed as is the case now with dark pools and broker crossing networks. The volume of trading going through such venues is negligible. We do not believe they deserve a great deal of regulatory attention. We would also emphasise that investors need a choice of venues and there should be no attempt to turn every venue into a regulated market or an MTF. This is partly because the rise of high frequency and algorithmic trading, about which we remain ambivalent, has changed the trading landscape. The trade size has decreased and our members sometimes have to balance the trade-off between total transparency when using regulated markets open to high frequency traders and others, and decreased market impact and liquidity for large orders when trading over the counter, whether in dark pools or crossing networks. Finally, we would urge CESR to recommend a harmonised approach to rule-making. In our experience, commercial interests have meant that voluntary guidance in this area does not produce the results which benefit the market as a whole. We would support limited and carefully targeted regulatory action where it is appropriate, provided it is fully supported by a robust cost benefit analysis. 2

3 Questions for Consultation ANNEX I Q1 Do you support the generic approach described above? We support CESR s generic approach. We recognise that the market has changed since the introduction of MiFID with the rise of high frequency and algorithmic trading, as well as the use of dark pools and broker crossing networks. However, our starting point remains that competition between various trading venues is a good thing which should be encouraged by regulators. There should be no monopolies of trading as was the case before MiFID in jurisdictions where a concentration rule existed. However, there needs to be a careful consideration of how any negative side effects of competition can be mitigated. If the proliferation of venues does not in fact result in lower transaction costs for investors, then such competition is failing to benefit anyone but intermediaries and the cost savings are not being passed down. The success or failure of a policy initiative cannot therefore be measured simply by looking at fees charged by venues or the number of venues available for trading. As mentioned above, investors have been most concerned about the effect of MiFID rules in the area of post-trade transparency. Fragmentation, coupled with loose standards in certain areas, has led to a deterioration in data quality. This is one area where we believe MiFID has failed and regulatory action is needed. In terms of pre-trade transparency, we agree with CESR s analysis. As CESR acknowledges the vast majority of the market is transparent and there is no doubt that regulated markets and MTFs should remain so this is the basis on which our members have the confidence to invest. However, in some cases exemptions are needed. The consequences of not having them would have a negative impact on investors as described above. We also agree that exemptions should be rules- rather than principles-based. We do, however, believe that any new rules would have to be carefully constructed to avoid obsolescence. Markets are dynamic and rules should be designed with change in mind enshrining something in regulation that would have to be tweaked on a regular basis is not the right way forward in our view. Question 2: Do you have any other general comments on the MiFID pre-trade transparency regime? We do not have any specific comments. Our members do not believe that any of the waivers need to be changed as they are meeting the purpose for which they were designed. CESR should therefore not be devoting disproportionate amount of time to these issues. Question 3: Do you consider that the current calibration for large in scale orders should be changed? If so, please provide reasoning for your view? 3

4 Question 4: Do you consider that the current calibration for large in scale orders should be changed? If so, please provide a specific proposal in terms of reduction of minimum order sizes and articulate the rationale for your proposal? We agree that the LIS waiver is needed to protect those market participants who trade in large sizes from adverse market impact. We would, however, note that order size is not the same as trade size so the two are not perfectly correlated. The decline in the size of trades of order books is likely to be influenced by factors other than the investors desire to minimise market impact. For example, high-frequency trading, brought about by technological innovation, is undoubtedly changing how trades are executed both on and off organised trading platforms. We do not believe there is any need to reduce the waiver thresholds. There seems to be no evidence to support the reduction. In any case, it is not clear how its size has been calibrated is the 25 per cent simply an arbitrary number chosen to reflect the perceptions of trade sizes decline? In our view it would be dangerous to base policy-making in this area anything but firm evidence. Q5: Which scope of the large in scale waiver do you believe is more appropriate considering the overall rationale for its application? Please provide reasoning for your views. We believe that stubs should retain LIS protections and that MiFID should be clarified to ensure that they can remain dark. This is because there is a risk that a part of an order which remains unexecuted, and which may be just below the LIS threshold, can give enough of a clue to other market participants about the order as a whole. However, the waiver will in most cases not be needed: there is no reason why an unexecuted stub should remain on an order book for any significant length of time. Question 6: Should the waiver be amended to include minimum thresholds for orders submitted to reference price systems? Please provide your rationale and, if appropriate, suggestions for minimum order thresholds. We believe that the reference price waiver is meeting the purpose for which it was designed. We do not think it needs to be changed in any way. Question 7: Do you have any specific comments on the reference price waiver, or the clarifications suggested in Annex I? We have no specific comments and we agree with and welcome the clarifications provided by CESR. Question 8: Do you have any specific comments on the waiver for negotiated trades? We remain in favour of the original policy rationale for the negotiated trade waiver and believe it should be retained. 4

5 Question 9: Do you have any specific comment on the waiver for order management facilities, or the clarifications provided in Annex I? We agree with CESR that the existing waiver should be retained. Question 10: Do you consider the SI definition could be made clearer by: i) removing the reference to non-discretionary rules and procedures in Article 21(1)(a) of the MiFID Implementing Regulation? Ii) providing quantitative thresholds of significance of the business for the market to determine what constitutes a material commercial role for the firms under Article 21(1)(a) of the MiFID Implementing Regulation? We would note that very few firms have applied to be SIs fewer than a dozen in the whole of the EU. This suggests that the regime is not working well and that a more wholesale rethink of it may be worth considering. Question 11: Do you agree with the proposal that SIs should be required to maintain quotes in a size that better reflects the size of business they are prepared to undertake? Yes, we agree. Question 12: Do you agree with the proposed minimum quote size? Yes, we agree. Question13: Do you consider that removing the SI price improvement restrictions for orders up to retail size would be beneficial/not beneficial? Please provide reasons for your views. We have no specific comments. Question 14: Do you agree with the proposal to require SIs to identify themselves where they publish post-trade information? Should they only identify themselves when dealing in shares for which they are acting as an SI up to standard market size (where they are subject to quoting obligations) or should all trades of SIs be identified? Yes, we believe SIs should be required to identify themselves and this should be for all trades, rather than just those in which they are acting as SIs. Question 15: Have you experienced difficulties with the application of Standard Market Size as defined in Table 3 of Annex II of the MiFID Implementing Regulation? If yes, please specify. We have no comments. Question 16: Do you have any comments on other aspects of the SI regime? We have no further comments. Question 17: Do you agree with this multi-pronged approach? 5

6 We do - we are pleased that CESR has taken such a keen interest in post-trade transparency. As CESR will be aware, our members have for some time now complained about the quality and timeliness of post-trade data, and have called for regulatory action to rectify failings in this area. The main issues have included: double counting of trades (leading to inflated volumes), inconsistent use of permitted delays, printing to obscure venues and lack of standardised reporting for certain types of trades. It is worth noting that the impact has been disproportionately felt on smaller investment managers who do not have the resources to look for and analyse prints from various sources, or pay for different data feeds. We are therefore very supportive of the proposed changes and the approach taken. Our members would be keen to see the proposed standards on post-trade reporting embedded in regulation. The UK FSA, in consultation with the industry, has in the past produced guidance in this area. The results were disappointing: although there has been some improvement, it is clear that unofficial guidance has not been enough of an incentive to change certain market participants behaviour. Also, rule changes are only one step in making the data clean and useable and ensuring consistency. It is crucial that entities reporting data are supervised properly to ensure that the data they report actually conforms to the MiFID rules. Without the explicit threat of regulatory sanctions, there is a risk that rules will continue to be ignored. CESR should concentrate on ensuring that the rules in this area are operated consistently across the EEA. Some believe that complex trading scenarios do not lend themselves to creation of rules. This is supposedly because trading is a very dynamic environment and because it would be difficult to describe every possible scenario. We do not agree with this. Post-MiFID experience has shown that regulation is the only way to ensure consistency and accuracy of data. Although it may be difficult to produce an exhaustive list of examples, this should be the ultimate aim. With that in mind, the CESR/Industry working group should not have a finite lifespan and be disbanded in July Instead, it should continue to exist for as long as it takes to accomplish the task at hand. We would also add that sufficient time should be given for this to work: rushing through a set of standards that would need to be amended in a short period of time may do more harm than good. Question 18: Do you agree with CESR s proposals outlined above to address concerns about real-time publication of post-trade transparency information? If not, please specify your reasons and include examples of situations where you might face difficulties fulfilling this proposed requirement. Question 19: In your view, would a 1-minute deadline lead to additional costs (e.g. in terms of systems and restructuring of processes within firms)? If so, please provide quantitative estimate of one-off and ongoing costs. What would be the impact on smaller firms? We agree with the proposed changes. Our members are overwhelmingly of a view that the standard should be strengthened and the deadline reduced despite some risks that such a move would carry. They think those risks would be outweighed by benefits. 6

7 Our members are convinced that the three-minute delay has been misused by some firms and that the rules as currently drafted permit this to happen. They do not think it is sufficient to say that information should be made available as close to real time as possible and within three minutes, as it gives too much discretion to reporting firms. There is a difference between the three minute delay being available if it is necessary and using such a delay routinely to your advantage. Reporting firms say that delays are only used in exceptional circumstances but the feeling amongst investors is that this has not been the case. The standard should be higher, as suggested by CESR. We are unable to quantify direct costs as our member firms do not report themselves. We would, however, note that they believe that the benefits of real time reporting would outweigh such costs. The argument that shorter delays would harm investors interests is therefore not representative of their views. Question 20: Do you support CESR s proposal to maintain the existing deferred publication framework whereby delays for large trades are set out on the basis of the liquidity of the share and the size of the transaction? We agree it is important to maintain a deferred publication framework for these trades. This is particularly important for institutional investors such as our members who trade in large sizes. The market impact of such trades should be minimised and the deferrals embedded in legislation would help this. Question 21: Do you agree with the proposal to shorten delays for publication of trades that are large in scale? If not, please clarify whether you support certain proposed changes but not others, and explain why? We agree. Our members support the printing of all trades at the end of the day. There may be times when it would be favourable to have a longer delay but the benefits of the proposal namely transparency and the ability to do proper transaction cost analysis - outweigh the costs in their view. Our members acknowledge that there may be some unintended consequences of the changes. Further work may need to be done to ensure that these are avoided as much as possible but any exceptions of which we would be sceptical - should be subject to strict supervision. Question 22: Should CESR consider other changes to the deferred publication thresholds so as to bring greater consistency between transaction thresholds across categories of shares? If so, what changes should be considered and for what reason? We have no specific comments to make. Question 23: In your view, would a reduction of the deferred publication delays and ii) an increase in the intraday transaction size lead to additional costs (e.g. in ability to unwind large positions and systems costs)? If so, please provide quantitative estimates of one-off and ongoing costs? 7

8 We are not convinced that direct costs would be significant, as firms will have systems in place already. For those that already adhere to a higher standard, direct costs should be minimal. In terms of indirect costs, there may be some but as mentioned above, our members believe that these would be outweighed by benefits. We would again emphasise that much will depend on the quality of supervision. Question 24: Do you agree with the CESR proposal to apply transparency requirements to each of the following: DRs, ETFs, ETCs and certificates? If you do not agree with this proposal for all or some of the instruments listed above, please articulate your reasons. We agree with CESR s proposal. Question 25: If transparency requirements were applied, would it be appropriate to use the same MiFID equity transparency regime for each of the equity-like financial instruments? If not, what specific aspect(s) of the MiFID equity transparency regime would need to be modified and for what reasons? Question 26: In your view, should the MiFID transparency requirements be applied to other equity-like financial instruments or to hybrid instruments (e.g. Spanish participaciones preferentes)? If so, please specify which instruments and provide a rationale for your view. We agree that the same regime should be applied. Question 27: Do you support the proposed requirements/guidance for APAs? If not, what changes would you make to the proposed approach? We support the concept of APAs and we believe this is the first and necessary step in addressing market failure and ensuring better data quality. In particular, we are pleased that APAs would eradicate the practice of printing trades on obscure websites. We do have some concerns about how the proposals would work in practice. The way the guidance is currently drafted may not be enough to ensure that data quality improves. First, it is not clear to us how APAs fit into the EU legislative architecture. CESR states that each APA will be approved by the local competent authority and that they will be subject to ongoing monitoring. However, it is not clear what the scope of that approval or monitoring is: if competent authorities are not able to supervise the APAs effectively and sanction poor reporting, there will still be scope for reporting errors and inconsistencies. At the moment, the regulatory responsibilities seem to be focused on one-way reporting by APAs whereas we think regulators need to be much more proactive. The guidelines proposed by CESR do not seem detailed enough. There has to be more granularity, both in terms of organisational requirements and also the reporting specifications. These should be compared to the requirements adopted by regulated markets publishing their own data. Much will depend on who chooses to become an APA and for what reasons. Commercial interests will have to play a part in data distribution but we would urge CESR to ensure those do not distort APAs service provision. 8

9 Question 28: In your view, should the MiFID obligation to make transparency information public in a way that facilitates the consolidation with data from other sources be amended? If so, what changes would you make to the requirement? Yes, we believe the MiFID obligation should be amended. It is clear that the current MiFID wording is insufficient to ensure effective data consolidation. There should be a stricter regulatory obligation to publish data in a format that enables it to be consolidated with data from other sources, whichever consolidation option is then taken. This could be achieved by amending Article 32(b) to ensure that the requirement is stricter than merely facilitating consolidation. Facilitation is not the same as being obliged to produce data which adheres to clear standards that in turn enable it to be consolidated with data from other sources. The meaning of similar when applied to data is not clear as it leaves room for subjective judgements by publishers about what can be deemed similar. We would also suggest that the rules explicitly state that the publication arrangements ought to comply with whatever standards are proposed regarding data quality, as addressed in section of the consultation. We would propose the following wording: Article 32(b) It must ensure that the data can be consolidated with data from other sources and adheres to any publication standards developed by ESMA. Question 29: In your view, would the approach described above contribute significantly to the development of a European consolidated tape? Yes, we believe the approach described above would contribute to the development of consolidated tape. Question 30: In your view, what would the benefits of multiple approved publication arrangements compared to the current situation post-mifid compared to an EU mandated consolidated tape? We believe CESR should recommend a mandated consolidated tape. Theoretically, multiple publication arrangements should lead to competition and therefore lower the cost of data. However, we are not convinced that market forces will be effective in this case. MiFID has been in operation for several years and data quality has been consistently poor, despite detailed industry guidance on the subject. Commercial interests have not produced an outcome that is beneficial for everyone. Even if the standards improve across the EU and data becomes consolidatable in a way that it currently is not, our members support the creation of a mandatory consolidated tape. This is largely for governance reasons: they believe that it would be better to run the tape as a utility of sorts rather than allow commercial interests to interfere with what is perceived to be a public good. 9

10 Question 31: Do you believe that MiFID provisions regarding cost of market data need to be amended? Question 32: in your view, should publication arrangements be required to make pre- and post-trade information available separately (and not make the purchase of one conditional upon the purchase of the other)? Please provide reasons for your response. Question 33: In your view, should publication arrangements be required to make post-trade information available free of charge after a delay of fifteen minutes. Please provide reasons for your response. Yes, we believe these provisions should be amended in the way CESR suggests. Pre and post trade information should be provided and charged for separately. The fees charged should reflect this. Our members employ a variety of means of measuring their execution quality on behalf of their clients. Some use transaction cost analysis, others their own models. They need the trading data in a disaggregated form to provide input for this process. At the moment, firms are forced to pay for feeds from different sources so the cost of data is too high. We also agree that post-trade data should be free after fifteen minutes. This gives market participants a choice of paying to get data immediately or waiting and receiving it for free after a delay. We are concerned, however, that the pricing models employed by data providers may be such that the cost of real-time data becomes prohibitive. Article 32(c) should therefore remain unchanged, and data should continue to be provided at a reasonable cost. Question 34: Do you support the proposed approach to a European mandatory consolidated tape? Our members are users of post-trade information. They will depend to a large extent on the pricing strategies developed by information providers. It is therefore difficult for us to assess the commercial reality of how either scenario (i.e. multiple providers or MCT) would operate and whether they would be commercially attractive and therefore viable. We would note, however, that from the governance perspective our members are in favour of a mandatory tape. If market transparency is to benefit market as a whole, then running the tape on an independent, not-for-profit basis would be the best way to ensure that it is done on a non-discriminatory basis with fair pricing. Should CESR decide against the mandatory tape, it should set a very clear timetable for the commercial solution and act swiftly if there is no improvement. Question 35: If not, what changes would you suggest to the proposed approach? Question 36: In your views, what would be the benefits of a consolidated tape compared to the current situation post-mifid and compared to multiple publication arrangements? 10

11 As CESR is already aware, our members have serious concerns with the quality of post-trade data. The lack of consistency in reporting, and the lack of clarity about how certain trades are reported, has caused problems for market participants both in terms of how immediate trading decisions are made and also, for investment managers, for transaction cost analysis. Having a consolidated tape of good quality should resolve this issue. Question 37: In your view, would providing trade reports to a MCT lead to additional costs? If so, please specify and where possible please provide quantitative estimates of one-off and ongoing costs. We have no specific comments to make. Question 38: Do you agree with this proposal? If not, please explain. Question 39: Do you consider that it would help addressing potential unlevel playing field across RMs and MTFs? Please elaborate. We agree. Question 40: In your view, what would be the benefits of the proposals with respect to organisational requirements for investment firms and market operators operating an MTF? Question 41: In your view, do the proposals lead to additional costs for investment firms and market operators operating an MTF? If so, please specify and where possible please provide quantitative estimates of one-off and ongoing costs. We are not in a position to provide any cost estimates, either one-off or ongoing. Question 42: Do you agree to introduce the definition of broker internal crossing process used for the fact finding into MiFID in order to attach additional requirements to crossing processes? If not what should be captured, and how should that be defined? Question 43: Do you agree with the proposed bespoke requirements? If not, what alternative requirements or methods would you suggest? Institutional investors such as our members, trading on behalf of their clients who are policyholders or pensioners, are significant users of dark pools. They do this because they believe that is where they can achieve best execution for some orders. That, in turn, is because being able to transact in size away from lit markets reduces the market impact and therefore transaction costs. Our members priority is to retain the widest possible choice of venues in the market. It would not be in their interest if all broker crossing venues were made into MTFs. Their business models are different and they serve a different purpose otherwise investors would currently be using only one or the other. Moreover, we do not believe that the intention of MiFID was to move trading to organised platforms. The volume of OTC trading has remained pretty static overall and the value of trading going through broker crossing networks is a pretty negligible proportion of it. We have not seen any evidence that they damage price formation in 11

12 any way. We therefore do not believe that broker crossing networks represent a huge cause for concern or need regulatory attention at this point in time. Having said that, we do believe that regulators and, to some extent other market participants, should be able to identify brokers that use internal crossing. We would therefore agree with the proposal to introduce a definition of broker crossing networks and with the bespoke requirements outlined by CESR. Question 44: Do you agree with setting a limit on the amount of client business that can be executed by investment firms crossing systems/processes before requiring investment firms to establish an MTF for the execution of client orders ( crossing systems/processes becoming an MTF)? a) What should be the basis for determining the threshold above which an investment firm s crossing system/process would be required to become an MTF? For example, should the threshold be expressed as a percentage of total European trading or other measures? Please articulate rationale for your response. b) In your view, should linkages with other investment firms broker crossing systems/processes be taken into account in determining whether an investment firm has reached the threshold above which the crossing system/process would need to become an MTF? If so, please provide a rationale, also on linking methods which should be taken into account. We believe CESR s analysis of broker crossing networks should consider in more detail the overall purpose and policy objectives of regulating trading venues. Placing the emphasis solely on the threshold at which broker crossing networks should become MTFs assumes a point at which the impact of a crossing network becomes significant can be easily calculated. It also seems to ignore the fact that investors use MTFs and broker crossing for different reasons. As noted above, institutional investors make a deliberate choice to use broker crossing networks at the moment where they could use MTFs or RMs. This is partly because they allow an opportunity to trade in size but it is also about trading away from organised markets where their large orders interact with those placed by highfrequency traders Regulators need to find a more objective way of measuring when the volume of trading going through broker crossing becomes so large that its activity has an impact on price formation and the overall market transparency. That is the point at which crossing networks ought to acquire some or all of the characteristics of public markets. The threshold chosen should not be an arbitrary one, or one based solely on experiences of other markets elsewhere? Question 45: In your view, do the proposed requirements for investment firms operating crossing systems/processes lead to additional costs? If so, please specify and where possible please provide quantitative estimates of one-off and ongoing costs. As institutional investors, we are not in a position to comment on costs that would be incurred by brokers should they be required to comply with various organisational 12

13 requirements. We would note, however, that any costs are likely to be passed to brokers clients investors. These benefits of change must outweigh those costs. Question 46: Do you think that replacing the waivers with legal exemptions (automatically applicable across Europe) would provide benefits or drawbacks? Please elaborate. We do not have any comments. Questions 47: Which reasons may necessitate the application of both criteria? Both criteria are relevant some trading strategies break up orders into multiple small trades so the number of transactions of its own may give a misleading picture of liquidity. Questions 48: Is a unique definition of liquid share for the purposes of Article 27 necessary? Yes, we believe a unique definition is necessary for the sake of consistency. Questions 49: If CESR were to propose a unique definition of liquid share which of the options do you prefer? a) apply condition a) and b) of the existing Article 22(1), or b) apply only condition a), or c) apply only condition b) of Article 22(1)? Please elaborate. We prefer option a) for the reasons outlined above. Questions 50: Is this discretion (for Member States to decide that investment firms comply with this obligation by transmitting the client limit order to a regulated market and/or an MTF) of any practical relevance? Do you experience difficulties with cross-border business due to a divergent use of this discretion in various Member States? We have no comments we do not believe discretion is used by our members. Question 51: Should the discretion granted to Member States in Article 22(2) to establish that the obligation to facilitate the earliest possible execution of an unexecuted limit order could be fulfilled by a transmission of the order to a RM and/or MTF be replaced with a rule? Yes, we believe this requirement should be harmonised across the EU. Question 52: Should the option granted to Member States in Article 36(2) of the MiFID Implementing Regulation be deleted or retained? Please provide reasoning for your view. We have no comments. 13

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15 Questions for Consultation ANNEX II Question 1: Do you agree to use ISO standard formats to identify the instrument, price notation and venue? If not, please specify reasons. Yes, we agree that the ISO standard formats should aid consolidation and consistency. Question 2: Do you agree that the unit price should be provided in the major currency (e.g. Euros) rather than the minor currency (e.g. Euro cents)? If not, please specify reasons. We agree. Question 3: Do you agree that each of the above types of transactions would need to be identified in a harmonised way in line with table 10? If not, please specify reasons. We agree. Question 4: Are there other types of non addressable liquidity that should be identified? If so, please provide a description and specify reasons for each type of transaction. We are not aware of any. Question 5: Would it be useful to have a mechanism to identify transactions which are not pre-trade transparent? Question 6: If you agree, should this information be made public trade-bytrade in real-time in an additional field or on a monthly aggregated basis? Please specify reasons for your position. Our members believe that it would be useful to have the dark trading identified in some way in post-trade reports. This information is needed by market participants to inform future trading decisions it is the kind of granularity that is actually relevant to how orders are placed. A monthly aggregated report would not be useful, however it would contain a vast amount of data that would need to be analysed. Some of our members think it would be published too late to be used in decision-making. We are not certain whether the identity of dark pools should be revealed in real time printing. Alternatives could include either end-of-day, or real time printing with a symbol denoting that the trade has not been subject to pre-trade transparency. Question 7: What would be the best way to address the situation where a transaction is the result of a non-pre-trade transparent order executed against a pre-trade transparent order? 15

16 We believe the non-pre-trade transparent trade is the one that should be identified in the report. Question 8: Do you agree each transaction published should be assigned a unique transaction identifier? If so, do you agree a unique transaction identifier should consist of a unique transaction identifier provided by the party with the publication obligation, a unique transaction identifier provided by the publication arrangement and a code to identify the publication arrangement uniquely? If not, please specify reasons. We agree and we have no specific comments to make. Question 9: Do you agree with CESR s proposal? If not please specify reasons. We agree. Question 10: Do you agree with CESR s proposal? If not please specify reasons. We agree. Question 11: Do you agree with CESR s proposal? If not please specify reasons. We agree. 16

17 Questions for Consultation ANNEX III Question 1: Do you agree with CESR s proposals? Are there other scenarios where there are difficulties in applying the post-trade transparency requirements? We agree with CESR s proposal. 17