ESMA drafts new OTC transparency and tick-size guidance

ESMA has updated its manual on transparency in pre- and post-tradeFinanstilsynet with further guidance on identifying which OTC derivatives are subject to transparency requirementsFinanstilsynet and on promoting a more uniform application of the tick-size regime in the Union.

The updated manual specifies which information is to be used to identify OTC derivatives for transparency purposes.Finanstilsynet The guidance is intended to bring greater consistency to the data reported to and published through the consolidated publication of trading information (consolidated tape).

The identification question matters because derivatives transparency no longer turns on whether the contract is traded on a trading venueEuropa. That concept proved problematic for derivatives given their lack of fungibility and the lack of appropriate identifying reference data. The scope instead turns on predefined characteristicsEuropa: exchange-traded derivatives remain coveredEuropa, while other derivatives are covered where they fall within the clearing obligation under EMIR and are centrally clearedEuropa, a test for which a degree of standardisation is a prerequisite. Only the most standardised and liquid interest-rate-derivative currency and tenor combinations are intended to fall within scopeEuropa, alongside certain credit default swaps referencing global systemically important banks or an index of such banks where centrally cleared even absent a clearing obligationEuropa. Trading venues are to supply identifying reference data for transparency purposesEuropa, with the globally agreed unique product identifier as the anchor, complemented where needed by additional identifying reference data set by delegated act.

The consistency aim reflects the consolidated-tape project. Consolidated tape providers collect trade reports from trading venues and approved publication arrangements and consolidate them into a continuous live data stream of price and volume per instrument. To date no entity had applied for authorisationEuropa, with ESMA identifying three obstacles: unclear routes for obtaining data from execution venues and reporting providers, insufficient harmonisation of reported data for cost-efficient consolidation, and weak commercial incentivesEuropa. The answer in the legislation is mandatory data contribution alongside harmonised data reports, with data-quality substance and format set in regulatory technical standards that account for industry standards and international developments.

Several of the technical standards connected to the consolidated publication of trading information (den konsoliderte offentliggjøringen av handelsinformasjon) have not yet entered into force.Finanstilsynet The changes to the manual are therefore to be regarded as a draft until the legal acts enter into force.Finanstilsynet Where the underlying standards are still missing, the new identification passages stand as draft direction rather than final applicable text.Finanstilsynet

ESMA has also updated its questions and answers on the tick-size regime.Finanstilsynet The update clarifies, among other things, in which cases trading venues and national supervisory authorities may intervene.Finanstilsynet The update is relevant for trading-venue operators, OTC-derivatives reporting and compliance staff and advisers on pre- and post-trade transparency, tick sizes and consolidated-tape reporting, who work with identification data and tick-size application and follow the entry into force of the missing technical standards.

The legal basis is Directive 2014/65/EU and Regulation (EU) No 600/2014 as amended by Regulation (EU) 2024/791, implemented through ESMA level 3 guidance in the transparency manual and the tick-size questions and answers.