At first glance, the MiFID II trading obligation for shares seems fairly benign, bringing the bulk of equities trading ‘safely’ back to regulated execution venues. Whilst appearing all encompassing, it still leaves room for plain old-fashioned OTC trading on an ad hoc basis (or, technically speaking, below the threshold for an EU SI). But add into the mix the trading of dual listed instruments and the impact becomes potentially more harmful.

ESMA has a long to-do list to get through before January, including the compilation of equivalence decisions for third country trading venues. An update from them this week attempts to bring clarity to the application of the trading obligation. ESMA states that where no equivalence decision exists, this should be taken to indicate that there is “currently no evidence that the EU trading in shares admitted to trading in that third country’s regulated markets can be considered as systematic, regular and frequent”. I take that to mean you can continue to trade dual listed shares outside of the EU as OTC and you don’t need an SI. This begs the question – are there any non-EU jurisdiction equities traded systematically and frequently in the EU? And which third country’s trading venues will need an equivalence decision in this context? Maybe that’s a decision we don’t need after all?

Answers on a postcard please.