The newly applicable provisions of MiFID II on reporting duties also concern financial transactions of Exchange-Traded Funds (ETFs). Considering that the majority of initial ETF trading (primary dealing or creation) takes place directly between market makers (such as credit institutions – buyers) and authorised participants (distributors), the upstream market for ETFs is made through over-the-counter trading, also known as dark pools.
Therefore the upstream market is opaque and ‘non-transparent’, according to Catherine Lafferty, who notes that under MiFID II ‘ETF trades [...] have to be transparently reported’.
More transparency with respect to trading volumes and liquidity of ETF downstream markets (which are the regular trading venues for ETFs) will increase use and trade of ETFs for the purpose of leveraging, considering that these securities are cost and tax efficient, considerably less risky (since the underlying assets-portfolio is diversified and the strategy is to track indexes) and flexible (they allow short-selling and margin trading).
Read here:
Funds Europe: ETFs get MiFID II securities lending boost
BETTER FINANCE article: How MiFID II will shine more light on financial markets
More information on ETFs: Central Bank of Ireland Discussion Paper: Exchange-Traded Funds.