Systematic internaliser (SI) in MiFID II - a counterparty, not a trading venue - Page 4

 

 


 

 

 

Articles 6 - 16 and Recitals 9 - 15 of the Commission Delegated Regulation (EU) 2017/567 of 18 May 2016 supplementing Regulation (EU) No 600/2014 of the European Parliament and of the Council with regard to definitions, transparency, portfolio compression and supervisory measures on product intervention and positions

 

Chapter II
Data provision obligation for trading venues and systematic internalisers

 

Article 6
Obligation to provide market data on a reasonable commercial basis
(Article 13(1), 15(1) and 18(8) of Regulation (EU) No 600/2014)


1.   For the purposes of making market data containing the information set out in Articles 3, 4, 6 to 11, 15 and 18 of Regulation (EU) No 600/2014 available to the public on a reasonable commercial basis, market operators and investment firms operating a trading venue and systematic internalisers shall, in accordance with Articles 13(1), 15(1) and 18(8) of Regulation (EU) No 600/2014, comply with the obligations set out in Articles 7 to 11 of this Regulation.


2.   Articles 7, 8(2), 9, 10(2) and 11 shall not apply to market operators or investment firms operating trading venues or to systematic internalisers that make market data available to the public free of charge.


Article 7
Obligation to provide market data on the basis of cost
(Article 13(1), 15(1) and 18(8) of Regulation (EU) No 600/2014)


1.   The price of market data shall be based on the cost of producing and disseminating such data and may include a reasonable margin.


2.   The cost of producing and disseminating market data may include an appropriate share of joint costs for other services provided by market operators or investment firms operating a trading venue or by systematic internalisers.


Article 8
Obligation to provide market data on a non-discriminatory basis
(Article 13(1), 15(1) and 18(8) of Regulation (EU) No 600/2014)


1.   Market operators and investment firms operating a trading venue and systematic internalisers shall make market data available at the same price and on the same terms and conditions to all customers falling within the same category in accordance with published objective criteria.


2.   Any differentials in prices charged to different categories of customers shall be proportionate to the value which the market data represents to those customers, taking into account:


(a) the scope and scale of the market data including the number of financial instruments covered and their trading volume;


(b) the use made by the customer of the market data, including whether it is used for the customer's own trading activities, for resale or for data aggregation.


3.   For the purposes of paragraph 1, market operators and investment firms operating a trading venue and systematic internalisers shall have scalable capacities in place to ensure that customers obtain timely access to market data at all times on a non-discriminatory basis.


Article 9
Obligations in relation to per user fees
(Article 13(1), 15(1) and 18(8) of Regulation (EU) No 600/2014)


1.   Market operators and investment firms operating a trading venue and systematic internalisers shall charge for the use of market data according to the use made by the individual end-users of the market data (‘per user basis’). Market operators and investment firms operating a trading venue and systematic internalisers shall put arrangements in place to ensure that each individual use of market data is charged only once.


2.   By way of derogation from paragraph 1, market operators and investment firms operating a trading venue and systematic internalisers may decide not to make market data available on a per user basis where to charge on a per user basis is disproportionate to the cost of making that data available, having regard to the scale and scope of the data.


3.   Market operators and investment firms operating a trading venue and systematic internalisers shall provide grounds for the refusal to make market data available on a per user basis and shall publish those grounds on their webpage.


Article 10
Obligation to keep data unbundled and to disaggregate market data
(Article 13(1), 15(1) and 18(8) of Regulation (EU) No 600/2014)


1.   Market operators and investment firms operating a trading venue and systematic internalisers shall make market data available without being bundled with other services.


2.   Prices for market data shall be charged on the basis of the level of market data disaggregation provided for in Article 12(1) of Regulation (EU) No 600/2014.


Article 11
Transparency obligation
(Article 13(1), 15(1) and 18(8) of Regulation (EU) No 600/2014)


1.   Market operators and investment firms operating a trading venue and systematic internalisers shall disclose the price and other terms and conditions for the provision of the market data in a manner which is easily accessible to the public.


2.   The disclosure shall include the following:


(a) current price lists, including:
— fees per display user;
— non-display fees;
— discount policies;
— fees associated with licence conditions;
— fees for pre-trade and for post-trade market data;
— fees for other subsets of information, including those required in accordance with Commission Delegated Regulation (EU) 2017/572;
— other contractual terms and conditions regarding the current price list;


(b) advance disclosure with a minimum of 90 days' notice of future price changes;


(c) information on the content of the market data including:

(i) the number of instruments covered;
(ii) the total turnover of instruments covered;
(iii) pre-trade and post-trade market data ratio;
(iv) information on any data provided in addition to market data;
(v) the date of the last licence fee adaption for market data provided;


(d) revenue obtained from making market data available and the proportion of that revenue compared to the total revenue of the market operator and investment firm operating a trading venue or systematic internalisers;


(e) information on how the price was set, including the cost accounting methodologies used and the specific principles according to which direct and variable joint costs are allocated and fixed joint costs are apportioned, between the production and dissemination of market data and other services provided by market operators and investment firms operating a trading venue or systematic internalisers.

 

Chapter III

 

Data publication obligation for systematic internalisers

 

Article 12

Obligation for systematic internalisers to make quotes public on a regular and continuous basis during normal trading hours

(Article 15(1) of Regulation (EU) No 600/2014)

 

For the purposes of Article 15(1) of Regulation (EU) No 600/2014, a systematic internaliser shall be considered to make public its quotes on a regular and continuous basis during normal trading hours only where the systematic internaliser makes the quotes available at all times during the hours which the systematic internaliser has established and published in advance as its normal trading hours.


Article 13

Obligation for systematic internalisers to make quotes easily accessible

(Article 15(1) of Regulation (EU) No 600/2014)

 

1. Systematic internalisers shall specify and update on their website's homepage which of the publication arrangements set out in Article 17(3)(a) of Regulation (EU) No 600/2014 they use to make public their quotes.


2. Where systematic internalisers make their quotes public through the arrangements of a trading venue or an APA, the systematic internaliser shall disclose their identity in the quote.


3. Where systematic internalisers employ more than one arrangement to make public their quotes, publication of the quotes shall occur simultaneously.


4. Systematic internalisers shall make public their quotes in a machine-readable format. Quotes shall be considered to be published in a machine-readable format where the publication meets the criteria set out in Commission Delegated Regulation (EU) 2017/571.


5. Where systematic internalisers make public their quotes through proprietary arrangements only, the quotes shall also be made public in a human-readable format. Quotes shall be considered to be published in a human-readable format where:


(a) the content of the quote is in a format which can be understood by the average reader;


(b) the quote is published on the systematic internaliser's website and the website's homepage contains clear instructions for accessing the quote.


6. Quotes shall be published using the standards and specifications set out in Commission Delegated Regulation (EU) 2017/587.


Article 14

Execution of orders by systematic internalisers

(Article 15(1), 15(2) and 15(3) of Regulation (EU) No 600/2014)

 

1. For the purposes of Article 15(1) of Regulation (EU) No 600/2014, exceptional market conditions are considered to exist where to impose on a systematic internaliser an obligation to provide firm quotes to clients would be contrary to prudent risk management and, in particular, where:


(a) the trading venue where the financial instrument was first admitted to trading or the most relevant market in terms of liquidity halts trading for that financial instrument in accordance with Article 48(5) of Directive 2014/65/EU;


(b) the trading venue where the financial instrument was first admitted to trading or the most relevant market in terms of liquidity allows market making obligations to be suspended;


(c) in the case of an exchange traded fund, a reliable market price is not available for a significant number of instruments underlying the ETF or the index;


(d) a competent authority prohibits short sales in that financial instrument according to Article 20 of Regulation (EU) No 236/2012 of the European Parliament and of the Council.


2. For the purposes of Article 15(1) of Regulation (EU) No 600/2014, a systematic internaliser may update its quotes at any time, provided at all times that the updated quotes are the consequence of, and consistent with, genuine intentions of the systematic internaliser to trade with its clients in a non-discriminatory manner.


3. For the purposes of Article 15(2) of Regulation (EU) No 600/2014, a price falls within a public range close to market conditions where the following conditions are fulfilled:


(a) the price is within the bid and offer quotes of the systematic internaliser;


(b) the quotes referred to in point (a) reflect prevailing market conditions for the relevant financial instrument in accordance with Article 14(7) of Regulation (EU) No 600/2014.


4. For the purposes of Article 15(3) of Regulation (EU) No 600/2014, execution in several securities shall be considered part of one transaction where the criteria laid down in Delegated Regulation (EU) 2017/587 are fulfilled.


5. For the purposes of Article 15(3) of Regulation (EU) No 600/2014, an order shall be considered subject to conditions other than the current market price where the criteria laid down in Delegated Regulation (EU) 2017/587 are fulfilled.


Article 15

Orders considerably exceeding the norm

(Article 17(2) of Regulation (EU) No 600/2014)

 

1. For the purposes of Article 17(2) of Regulation (EU) No 600/2014, the number or volume of orders shall be considered to considerably exceed the norm where a systematic internaliser cannot execute the number or volume of those orders without exposing itself to undue risk.


2. Investment firms acting as systematic internalisers shall determine in advance and in a manner that is objective and consistent with their risk management policy and procedures referred to in Article 23 of Commission Delegated Regulation (EU) 2017/565 (9), when the number or volume of orders sought by clients is considered to expose the firm to undue risk.


3. For the purposes of paragraph 2, a systematic internaliser shall establish, maintain and implement as part of its risk management policy and procedures, a policy for identifying the number or volume of orders that it can execute without being exposed to undue risk, taking into account both the capital that the firm has available to cover the risk for that type of trade and the prevailing conditions in the market.


4. In accordance with Article 17(2) of Regulation (EU) No 600/2014, the policy referred to in paragraph 3 shall be non-discriminatory to clients.


Article 16

Size specific to the instrument

(Article 18(6) of Regulation (EU) No 600/2014)

 

For the purposes of Article 18(6) of Regulation (EU) No 600/2014, the size specific to the instrument in respect of instruments traded on request for quote, voice, hybrid or other trading forms shall be as set out in Annex III to Commission Delegated Regulation (EU) 2017/583 (10).

 

Recitals 9 - 15

 

(9) This Regulation further specifies the conditions which systematic internalisers must fulfil to comply with the obligation to make quotes public on a regular and continuous basis during normal trading hours and easily accessible to other market participants to ensure that market participants wishing to access the quotes may effectively access them.


(10) Where systematic internalisers publish quotes through more than one means of publication they should provide their quotes simultaneously through each arrangement to ensure that the quotes published are consistent and that market participants may access the information at the same time. Where systematic internalisers make quotes public through the arrangements of a regulated market or a Multilateral Trading Facility (MTF) or through a data reporting services provider they should disclose their identity in the quote in order to enable market participants to direct their orders to it.


(11) This Regulation further specifies various technical aspects of the scope of the transparency obligations of systematic internalisers in order to ensure a consistent and uniform application across the Union. It is necessary that the exception to systematic internalisers' obligation to make public their quotes on a regular and continuous basis be strictly limited to situations where the continued provision of firm prices to clients may be contrary to the prudent management of the risks the investment firm is exposed to in its capacity as systematic internalisers, having regard to other mechanisms which may provide additional safeguards against such risks.


(12) In order to ensure that the exception to systematic internalisers obligations to execute the orders at the quoted prices at the time of reception of the order in accordance with Article 15(2) of Regulation (EU) No 600/2014 is limited to transactions which by their nature do not contribute to price formation, this Regulation further specifies exhaustively the conditions for what constitutes transactions in several securities as part of one transaction and orders subject to conditions other than the current market prices.

 

(13) The criterion specifying that a price falls within a public range close to market conditions reflects the need to ensure that execution by systematic internalisers contribute to price formation whilst not impeding on the possibility for systematic internalisers to offer price improvement in justified cases.


(14) In order to ensure that customers have access to systematic internalisers quotes in a non-discriminatory way but at the same time ensuring a proper risk management which takes into account the nature, scale and complexity of the activities of individual firms, it is necessary to specify that the number or volume of orders from the same client should be regarded as considerably exceeding the norm where a systematic internaliser cannot execute those orders without exposing itself to undue risk, something which should be defined in advance as a part of the firm's risk management policy and be based on objective factors and be stated in writing and made available to customers or potential customers.


(15) Since liquidity providers and systematic internalisers both trade on own account and incur comparable levels of risks, it is appropriate to determine the size specific to the instrument in a uniform way for these categories. Therefore, the size specific to the instrument for the purposes of Article 18(6) of Regulation (EU) No 600/2014 should be the size specific to the instrument determined in accordance with Article 9(5)(d) of Regulation (EU) No 600/2014 and as further specified in regulatory technical standards in accordance with this provision.

 

 

 

 

 

 

Advertisements


 

 

 

 

 

 



Last Updated on Saturday, 11 November 2017 21:56
 

Search

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