Systematic internaliser (SI) in MiFID II - a counterparty, not a trading venue - Page 2

 


 

 

 

Systematic internalisers for shares, depositary receipts, ETFs, certificates and other similar financial instruments

 

An investment firm shall be considered to be a systematic internaliser in accordance with Article 4(1)(20) of Directive 2014/65/EU in respect of each share, depositary receipt, exchange traded fund (ETF), certificate and other similar financial instrument where it internalises according to the following criteria:

 

(a) on a frequent and systematic basis in the financial instrument for which there is a liquid market in accordance with Article 2(1)(17)(b) of Regulation (EU) No 600/2014 where during the past 6 months:

 

(i) the number of OTC transactions carried out by it on own account when executing client orders is equal to or larger than 0.4% of the total number of transactions in the relevant financial instrument executed in the Union on any trading venue or OTC during the same period;

 

(ii) the OTC transactions carried out by it on own account when executing client orders in the relevant financial instrument take place on average on a daily basis;

 

(b) on a frequent and systematic basis in the financial instrument for which there is not a liquid market in accordance with Article 2(1)(17)(b) of Regulation (EU) No 600/2014 where during the past 6 months the OTC transactions carried out by it on own account when executing client orders takes place on average on a daily basis;

 

(c) on a substantial basis in the financial instrument where the number of OTC trades carried out by it on own account when executing client orders is, during the past 6 months, equal to or larger than either:

 

(i) 15% of the total turnover in that financial instrument executed by the investment firm on own account or on behalf of clients and executed on a trading venue or OTC;

 

(ii) 0.4% of the total turnover in that financial instrument executed in the Union on a trading venue or OTC.

 

Article 12 of the Commission Delegated Regulation (EU) 2017/565 of 25 April 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council as regards organisational requirements and operating conditions for investment firms and defined terms for the purposes of that Directive

 

 

 

 

Systematic internalisers for bonds

 

An investment firm shall be considered to be a systematic internaliser in accordance with Article 4(1)(20) of Directive 2014/65/EU in respect of all bonds belonging to a class of bonds issued by the same entity or by any entity within the same group where, in relation to any such bond, it internalises according to the following criteria:

 

(a) on a frequent and systematic basis in a bond for which there is a liquid market in accordance with Article 2(1)(17)(b) of Regulation (EU) No 600/2014 where during the past 6 months:

 

(i) the number of OTC transactions carried out by it on own account when executing client orders is equal to or larger than 2.5% of the total number of transactions in the relevant bond executed in the Union on any trading venue or OTC during the same period;

 

(ii) the OTC transactions carried out by it on own account when executing client orders in the relevant financial instrument take place on average once a week;

 

(b) on a frequent and systematic basis in a bond for which there is not a liquid market in accordance with Article 2(1)(17)(b) of Regulation (EU) No 600/2014 where during the past 6 months the OTC transactions carried out by it on own account when executing client orders takes place on average once a week;

 

(c) on a substantial basis in a bond where the number of OTC trades carried out by it on own account when executing client orders is, during the past 6 months, equal to or larger than either:

 

(i) 25% of the total nominal amount traded in that bond executed by the investment firm on own account or on behalf of clients and executed on a trading venue or OTC;

 

(ii) 1% of the total nominal amount traded in that bond executed in the Union on a trading venue or OTC. 

 

Article 13 of the Commission Delegated Regulation (EU) 2017/565 of 25 April 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council as regards organisational requirements and operating conditions for investment firms and defined terms for the purposes of that Directive

 

 

 

 

 

 

Systematic internalisers for structured finance products

 

An investment firm shall be considered to be a systematic internaliser in accordance with Article 4(1)(20) of Directive 2014/65/EU in respect of all structured finance products belonging to a class of structured finance products issued by the same entity or by any entity within the same group where, in relation to any such structured finance product, it internalises according to the following criteria:

 

(a) on a frequent and systematic basis in a structured finance product for which there is a liquid market in accordance with Article 2(1)(17)(b) of Regulation (EU) No 600/2014 where during the past 6 months:

 

(i) the number of OTC transactions carried out by it on own account when executing client orders is equal to or larger than 4% of the total number of transactions in the relevant structured finance product executed in the Union on any trading venue or OTC during the same period;

 

(ii) the OTC transactions carried out by it on own account when executing client orders in the relevant financial instrument take place on average once a week;

 

(b) on a frequent and systematic basis in a structured finance product for which there is not a liquid market in accordance with Article 2(1)(17)(b) of Regulation (EU) No 600/2014 where during the past 6 months the OTC transactions carried out by it on own account when executing client orders takes place on average once a week;

 

(c) on a substantial basis in a structured finance product where the number of OTC trades carried out by it on own account when executing client orders is, during the past 6 months, equal to or larger than either:

 

(i) 30% of the total nominal amount traded in that structured finance product executed by the investment firm on own account or on behalf of clients and executed on a trading venue or OTC;

 

(ii) 2.25% of the total nominal amount traded in that structured finance product executed in the Union on a trading venue or OTC.

 

Article 14 of the Commission Delegated Regulation (EU) 2017/565 of 25 April 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council as regards organisational requirements and operating conditions for investment firms and defined terms for the purposes of that Directive

 

 

 

 

 

Systematic internalisers for derivatives

 

An investment firm shall be considered to be a systematic internaliser in accordance with Article 4(1)(20) of Directive 2014/65/EU in respect of all derivatives belonging to a class of derivatives where, in relation to any such derivative, it internalises according to the following criteria:

 

(a) on a frequent and systematic basis in a derivative for which there is a liquid market in accordance with Article 2(1)(17)(b) of Regulation (EU) No 600/2014 where during the past 6 months:

 

(i) the number of OTC transactions carried out by it on own account when executing client orders is equal to or larger than 2.5% of the total number of transactions in the relevant class of derivatives executed in the Union on any trading venue or OTC during the same period;

 

(ii) the OTC transactions carried out by it on own account when executing client orders in this class of derivatives take place on average once a week;

 

(b) on a frequent and systematic basis in a derivative for which there is not a liquid market in accordance with Article 2(1)(17)(b) of Regulation (EU) No 600/2014 where during the past 6 months the OTC transactions carried out by it on own account in the relevant class of derivatives when executing client orders takes place on average once a week;

 

(c) on a substantial basis in a derivative where the number of OTC trades carried out by it on own account when executing client orders is, during the past 6 months, equal to or larger than either:

 

(i) 25% of the total nominal amount traded in that class of derivatives executed by the investment firm on own account or on behalf of clients and executed on a trading venue or OTC; or

 

(ii) 1% of the total nominal amount traded in that class of derivatives executed in the Union on a trading venue or OTC.

 

Article 15 of the Commission Delegated Regulation (EU) 2017/565 of 25 April 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council as regards organisational requirements and operating conditions for investment firms and defined terms for the purposes of that Directive

 

 

 

 

 

Systematic internalisers for emission allowances

 

An investment firm shall be considered to be a systematic internaliser in accordance with Article 4(1)(20) of Directive 2014/65/EU in respect of emission allowances where, in relation to any such instrument, it internalises according to the following criteria:

 

(a) on a frequent and systematic basis in an emission allowance for which there is a liquid market in accordance with Article 2(1)(17)(b) of Regulation (EU) No 600/2014 where during the past 6 months:

 

(i) the number of OTC transactions carried out by it on own account when executing client orders is equal to or larger than 4% of the total number of transactions in the relevant type of emission allowances executed in the Union on any trading venue or OTC during the same period;

 

(ii) the OTC transactions carried out by it on own account when executing client orders in this type of emission allowances take place on average once a week;

 

(b) on a frequent and systematic basis in an emission allowance for which there is not a liquid market in accordance with Article 2(1)(17)(b) of Regulation (EU) No 600/2014 where during the past 6 months the OTC transactions carried out by it on own account in the relevant type of emission allowances when executing client orders takes place on average once a week;

 

(c) an investment firm internalises on a substantial basis in an emission allowance where the number of OTC trades carried out by it on own account when executing client orders is, during the past 6 months, equal to or larger than either of the following:

 

(i) 30% of the total nominal amount traded in that type of emission allowances executed by the investment firm on own account or on behalf of clients and executed on a trading venue or OTC;

 

(ii) 2.25% of the total nominal amount traded in that type of emission allowances executed in the Union on a trading venue or OTC.

 

Article 16 of the Commission Delegated Regulation (EU) 2017/565 of 25 April 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council as regards organisational requirements and operating conditions for investment firms and defined terms for the purposes of that Directive

 

 

 

 

 

Relevant assessment periods

 

The conditions set out in Articles 12 to 16 shall be assessed on a quarterly basis on the basis of data from the past 6 months. The assessment period shall start on the first working day of the months of January, April, July and October.

 

Newly issued instruments shall only be considered in the assessment when historical data covers a period of at least three months in the case of shares, depositary receipts, ETFs, certificates and other similar financial instruments, and six weeks in the case of bonds, structured finance products and derivatives. 

 

Article 17 of the Commission Delegated Regulation (EU) 2017/565 of 25 April 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council as regards organisational requirements and operating conditions for investment firms and defined terms for the purposes of that Directive

 

 

 

 

 

Recitals 18 and 19 of the Commission Delegated Regulation (EU) 2017/565 of 25 April 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council as regards organisational requirements and operating conditions for investment firms and defined terms for the purposes of that Directive

 

(18) In order to ensure the objective and effective application of the definition of systematic internalisers in the Union in accordance with Article 4(1)(20) of Directive 2014/65/EU, further specifications should be provided on the applicable pre-set limits for the purposes of what constitutes frequent systematic and substantial over the counter (OTC) trading. Pre-set limits should be set at an appropriate level to ensure that OTC trading of such a size that it had a material effect on price formation is within scope while at the same time excluding OTC trading of such a small size that it would be disproportionate to require the obligation to comply with the requirements applicable to systematic internalisers.


(19) Pursuant to Directive 2014/65/EU, a systematic internaliser should not be allowed to bring together third party buying and selling interests in functionally the same way as a trading venue. A systematic internaliser should not consist of an internal matching system which executes client orders on a multilateral basis, an activity which requires authorisation as a multilateral trading facility (MTF). An internal matching system in this context is a system for matching client orders which results in the investment firm undertaking matched principal transactions on a regular and not occasional basis.

 

 

 

Advertisements


 

 

 

 



Last Updated on Thursday, 27 July 2017 20:29
 

Search

Twitter
Copyright © 2009 - 2017 Michal Glowacki. All rights reserved.
The materials contained on this website are for general information purposes only and are subject to the disclaimer