Transparency – MiFID Rules
A constellation of Articles within MiFID deal with transparency: Article 27 [Obligation for investment firms to make public firm quotes]; Article 28 [Post-trade disclosure by investment firms]; Article 29 [Pre-trade transparency requirements for MTFs]; Article 30 [Post-trade transparency requirements for MTFs]; Article 44 [Pre-trade transparency requirements for regulated markets]; and Article 45 [Post-trade transparency requirements for regulated markets]. Collectively, these Article impose substantial obligations on markets, investment firms, and MTFs to make public transactions in securities. Recital 44 drives home the point of the importance of transparency “to ensure the effective integration of Member State equity markets, to promote the efficiency of the overall price formation process for equity instruments, and to assist the effective operation of best execution obligations”. This rationale accords seamlessly with the rational underpinning the US NMS and appears to be a statement of the obvious. Investors require pre-trade transparency of prices to determine whether to buy or sell a security. If the investor enters a market order, post-trade transparency is absolutely necessary since the investor never knows the exact price paid ex ante.
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