|Direct Electronic Access (DEA)|
|European Union Electricity Market Glossary|
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Pursuant to Article 4(1)(41) of MiFID II, Direct Electronic Access (DEA) means an arrangement where a member or participant or client of a trading venue permits a person to use its trading code so the person can electronically transmit orders relating to a financial instrument directly to the trading venue and includes arrangements which involve the use by a person of the infrastructure of the member or participant or client, or any connecting system provided by the member or participant or client, to transmit the orders (direct market access) and arrangements where such an infrastructure is not used by a person (sponsored access).
According to the Consultation Paper of the Financial Conduct Authority on Markets in Financial Instruments Directive II Implementation (CP15/43) of December 2015 (p. 120, 121), a firm which permits direct electronic access to an OTF it operates must:
(1) not permit members or participants of the OTF to provide such services unless they are:
(a) investment firms authorised under MiFID; or
(b) CRD credit institutions; or
(c) third country investment firms; or
(d) overseas firms registered in accordance with article 46 of MiFIR;
(2) set, and apply, criteria for the suitability of persons to whom direct electronic access services may be provided;
(3) ensure that the member or participant of the OTF retains responsibility for adherence to the requirements of MiFID in respect of orders and trades executed using the direct electronic access service;
(4) set standards for risk controls and thresholds on trading through direct electronic access;
(5) be able to distinguish and if necessary stop orders or trading on that trading venue by a person using direct electronic access separately from:
(a) other orders;
(b) trading by the member or participant providing the direct electronic access; and
(6) have arrangements to suspend or terminate the provision of direct electronic access on that market by a member or participant in the case of any non-compliance with this rule.
Internal regulations of ICE Futures Europe envision that DEA providers should also consider the authorisation status of their clients (Guidance ICE Futures Europe and ICE Endex Guidance on Member Requirements under MiFID II of June 2017 ).
MiFID II reporting for DEA
When it comes to MiFID reporting, DEA provider should report as acting in a matched principal (MTCH) or "any other capacity" (AOTC) (Guidelines Transaction reporting, order record keeping and clock synchronisation under MiFID II, 10 October 2016, ESMA/2016/1452, p. 21).
Annex to Commission Delegated Regulation (EU) 2017/580 of 24.6.2016 supplementing Regulation (EU) No 600/2014 of the European Parliament and of the Council with regard to regulatory technical standards for the maintenance of relevant data relating to orders in financial instruments envisions that information on DEA must be an element of the content of the order details to be maintained at the disposal of the competent authority (this is effected in the Field 2 of the respective format where if the order was submitted to the trading venue using DEA as defined in Article 4(1)(41) of MiFID II, the parameter value should be "true" and - in the opposite case - "false").
Moreover, in case of DEA, the identity of the DEA provider should be put in the Field 1 (Identification of the entity which submitted the order), which, in principle, should indicate the identity of the member or participant of the trading venue.
The similar case is for the Field 3 (Client identification code), which is designed to indicate the code used to identify the client of the member or participant of the trading venue. Also in the Field 3 in case there is DEA, the code of the DEA user is required to be used.
Requirements for DEA providers offering indirect clearing services
DEA providers which also offer indirect clearing services for the purposes of MiFID and the EMIR Regulation must ensure that they comply with rules applying to indirect clearing under:
- MiFIR Article 30,
- EMIR Article 4, and
- the relevant level 2 measures.
Algorithmic trading requirements for DEA
Algorithmic trading requirements for DEA are stipulated in Articles 19 - 23 (Chapter III) of the Commission Delegated Regulation (EU) 2017/589 of 19 July 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council with regard to regulatory technical standards specifying the organisational requirements of investment firms engaged in algorithmic trading.
|Last Updated on Sunday, 13 August 2017 17:19|