ESMA has published a statement in which it outlines its approach, in the event of a no-deal Brexit, to the application of the trading obligations for shares (STOs) under article 23 of MiFIR in the absence of an equivalence decision relating to the UK by the European Commission.
The statement makes it clear that the EU’s STOs will apply to all shares traded on EU27 trading venues that are shares of firms incorporated in the EU (EU ISINs), and of companies incorporated in the UK (GB ISINs) where these companies’ shares are ‘liquid’ in the EU. Furthermore, ESMA stated that its goal is to provide as much certainty as possible to market participants and to mitigate potential adverse effects of a trading obligation.
In response, the FCA stated that it acknowledges that clarifying the application of the STOs in the event of a no-deal Brexit will help to provide certainty. The onshoring of EU legislation in preparation for Brexit means that the UK will, as well as the EU, have an STO. Applying the same approach as ESMA to the scope of the UK STO would, based on current trading data, mean there would be a large degree of overlap between the UK and EU obligations.
The FCA stands ready to engage constructively with ESMA and other European authorities to achieve certainty and minimise risks of disruption to the market in the event of a no deal Brexit.