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European regulation update: MiFID II / MiFIR
European regulation update: MiFID II / MiFIR

European regulation update: MiFID II / MiFIR


Focus on the latest European regulatory developments on MiFID II / MiFIR as of June 2018

MiFID II / MiFIR - double volume cap (DVC)

The European Securities and Markets Authority (ESMA) published double volume cap (DVC) data for March 2018 (9 March). DVC limits the amount of dark trading allowed under the reference price waiver and negotiated transaction waiver.  ESMA expects to follow up the data publication with an indication of any ban expected to be triggered from the March data, as well as updates following publication of the January and February 2018 data on 7 March 2018.

ESMA published double volume cap data for January and February 2018 (09 April). ESMA delayed the implementation of the DVC in January 2018 due to data quality and completeness issues, and, as such, ESMA's first DVC publication relates to January and February 2018. DVC limits the amount of dark trading allowed under the reference price waiver and negotiated transaction waiver. On the basis of ESMA's DVC, two caps will limit dark trading in certain equity and equity-like instruments which ESMA has communicated to national competent authorities (NCAs), which should suspend, within two working days, the use of waivers in those financial instruments where the caps were exceeded. NCAs are required to suspend the waivers for six months from 12 March 2018. 

ESMA updated double volume cap register (10 April). The update includes DVC data and calculations for 1 March 2017 – 28 February 2018. DVC limits the amount of dark trading allowed under the reference price waiver and negotiated transaction waiver. The instruments which breached the DVC thresholds for March which are already subject to caps will continue to be suspended and trading under the waivers for all new instruments in breach of the DVC thresholds should be suspended from 13 April 2018 to 13 October 2018.

MiFID II / MiFIR - other ESMA topics

ESMA issued an opinion on the treatment of packages under trading obligation for derivatives (21 March). Package orders/transactions are composed of two or more financial instruments that are priced as a single unit, simultaneously executed, and where the execution of each component is contingent on the execution of all other components. The opinion clarifies the categories of packages for which the derivative components subject to the trading obligation are always required to be traded on a trading venue.

ESMA updated Q&A on investor protection and intermediaries topics (23 March). ESMA has updated the document with seven new answers to questions on:

  • Research, relating to macro-economic analysis, and research related to fixed-income, currencies and commodities
  • Post-trade reporting, in particular holding a retail client account, and reporting on depreciation
  • Use of a product's costs reported in a PRIIPS key information document (KID)
  • The application of inducements rules to financial instruments in which the firm has invested on behalf of the client before 3 January 2018
  • The meaning of the term 'ongoing relationship'.

ESMA updated Q&As on market structures and transparency topics (28 March). The Q&As provides clarification on the following topics:

  • The scope of the trading obligation for derivatives
  • The default tick size regime
  • Fee structures
  • Systematic internaliser (SI) and matched principal trading
  • Direct Electronic Acces (DEA) provider’s controls and suitability checks.

ESMA requests further guidance from Commission on ancillary activity test (9 April). ESMA requests the Commission provide further guidance on the criteria for the ancillary activity test under Article 2(4) MiFID II and RTS 20. Commission Delegated Regulation (EU) 2017/59) establishes criteria and tests to be performed for establishing whether an activity is to be considered to be ancillary of the main business, but questions have emerged from stakeholders, in particular on whether the tests should be performed at group or single entity level.

ESMA revised transitional transparency calculations (18 April). It has updated its MiFID II /MiFIR transitional transparency calculations (TTC) for bonds relating to liquidity assessment for bond instruments except for ETCs and ETNs. The TTC apply for bond instruments from 3 January 2018 until 15 May 2018.

ESMA publishes 1Q18 liquidity assessment for bonds (2 May). ESMA has published its first liquidity assessment for bonds subject to pre- and post-trade requirements under MiFID II and MiFIR. In the first quarter of 2018, ESMA has identified 220 bonds to be sufficiently liquid to be subject to ESMA's real-time transparency requirements under MiFID II. Transparency requirements for those instruments apply from 16 May to 15 August 2018. 

ESMA updated FAQs on transitional transparency calculations (15 May).

ESMA updated Q&A on investor protection and intermediaries (25 May). In particular, it has been updated with 9 new answers to questions on:

  • The definition of 'other liquidity provider' in RTS 27
  • Clients who may be treated as professionals on request
  • Reverse solicitation

The provision of investment services by UCITS management companies or alternative investment fund managers (AIFMs) through branches in host Member States.

Read more

Regulatory memo on MiFID II/ MiFIR

MiFID II investment research: freedom under constraint

How MiFID II will impact Asia’s asset management industry

Regulations in Europe and Asia Pacific : 2018 edition

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