Revocation of retained EU law Transitional amendments Amendments to the Markets in Financial Instruments Regulation (MiFIR) and the European Market Infrastructure Regulation (EMIR) 2. Replacing the pre-trade transparency waiver regime and removing the Double Volume Cap
The MiFID II framework requires trading venues and systematic internalisers to publish details about bids and offers before a trade has been completed. This is known as pre-trade transparency. Pre-trade transparency helps ensure an efficient price discovery process, but in some instances, it can impair liquidity. For example, market participants can use pre-trade information to increase their prices or create a shortage of shares, which can result in false indications of liquidity. This can have a negative impact on price formation.
	To mitigate this, MiFIR includes four pre-trade transparency waivers for equity and equity-like instruments, which firms can use to avoid publishing offered, executable quotes before a trade has been completed. These are:
the reference price (RP) waiver, which can be used where a trading venue matches orders for an equity instrument based on the midpoint between current bid and offer prices 1 of the trading venue where that instrument was first admitted to trading or the most relevant market in terms of liquidity 2 ;
the negotiated trade (NT) waiver, for transactions that are negotiated bilaterally but are reported on venues;
the large in scale (LIS) waiver, for orders considered large-in-scale against normal market size; and
the order management facilities waiver, for orders held in an order management facility of a trading venue pending disclosure.
	MiFIR also introduced a mechanism to limit the amount of trading that happens under the reference price and negotiated trade waivers: the Double Volume Cap (DVC).
	The Act revokes the existing system of waivers from pre-trade transparency requirements and instead gives the FCA new rule-making powers to determine under which circumstances waivers are available and any conditions that are to be attached to their use. This will allow the FCA to make evidence-based decisions about the circumstances in which waivers should apply.
	As part of this change, the Act removes the DVC from the MiFID II framework.
	Research on the impact of trading without pre-trade transparency on the integrity and efficiency of markets suggests that the relationship between price formation and execution costs is complex and variable. It also shows that banning trading happening without pre-trade transparency can result in volumes moving into hybrid, trading mechanisms that do not operate under full transparency. When this happens, it is unlikely that volumes will return to transparent public markets. Furthermore, evidence shows that the use of so-called dark pools can reduce the transaction costs of large institutional orders. Removing the DVC will therefore give firms greater choice over where they trade to get the best prices for investors.
	The FCA will be required to monitor UK markets in order to continue its own research into assessing the impacts of trading with no pre-trade transparency. The FCA can only intervene to limit the availability of a waiver if it considers that market integrity is impacted and must only do so having first consulted with HM Treasury. When considering intervention, the FCA must consider evidence from across the globe as to the impact of trading without pre-trade transparency.