ESMA70-872942901-35 — Q&A on MiFID II and MiFIR transparency topics
Q&A on MiFID II and MiFIR transparency topics
Authority
ESMA
Reference
ESMA70-872942901-35
Legal basis
MiFID II and MiFIR (transparency)
Status
In force
Published
27 October 2023
Source
Documents
Questions and Answers
On MiFID II and MiFIR transparency topics
Please note that this document is not updated after 31 December 2023. For Q&As issued from 1 January 2024, please search in the ESMA Q&A IT-tool.
Table of Contents
1
Introduction ...............................................................................................................16
2
General Q&As on transparency topics.......................................................................19
3
Equity transparency [Last update: 30/09/2021]..........................................................28
4
Non-equity transparency [Last update: 31/03/2023] ..................................................30
5
Pre-trade transparency waivers [Last update: 12/07/2019]........................................40
6
The double volume cap mechanism [Last update: 28/01/2022] .................................49
7
The systematic internaliser regime [Last update: 08/07/2020] ...................................51
8
Data reporting services providers [Last update: 01/02/2019] .....................................68
9
Third country issues [Last update: 05/09/2022] .........................................................70
Acronyms and definitions used
APA
Approved Publication Arrangement
AOR
Automated Order Router
AVT
Average Value of Transactions
CTP
Consolidated Tape Provider
DVC
Double Volume Cap
DRSP
Data reporting Services Provider
EB
Executing Broker
EFP
Exchange For Physical
ESMA
The European Securities and Markets Authority
ETF
Exchange Traded Fund
LIS
Large In Scale
MiFID I
Markets in Financial Instruments Directive - Directive 2004/39/EC of the European Parliament and of the Council
MiFID II
Markets in Financial Instruments Directive (recast) - Directive 2014/65/EU of the European Parliament and of the Council
MiFIR
Markets in Financial Instruments Regulation - Regulation 600/2014 of the European Parliament and of the Council
MTF
Multilateral Trading Facility
NCA
National Competent Authority
Q&A
Question and answer
RFMD
Request For Market Data
RTS
Regulatory Technical Standards
RTS 1
Commission Delegated Regulation (EU) 2017/587 on transparency requirements for trading venues and investment
4
RTS 2
Commission Delegated Regulation (EU) 2017/583 on transparency requirements for trading venues and investment firms in respect of bonds, structured finance products, emission allowances and derivatives
RTS 3
Commission Delegated Regulation (EU) 2017/577 on the volume cap mechanism and the provision of information for the purposes of transparency and other calculations
RTS 13
Commission Delegated Regulation (EU) 2017/571 on the authorisation, organisational requirements and the publication of transactions for data reporting services providers
RTS 22
Commission Delegated Regulation (EU) 2017/590 on the reporting of transactions to competent authorities
RTS 23
Commission Delegated Regulation (EU) 2017/585 on the data standards and formats for financial instrument reference data and technical measures in relation to arrangements to be made by the European Securities and Markets Authority and competent authorities
NAV
Net Asset Value
PB
Prime Broker
RM
Regulated Market
SFP
Structured Finance Products
SMS
Standard Market Size
TOTV
Trading On a Trading Venue in the EU
Table of questions
Section 2 General Q&As on transparency topics
1
Obligation on trading venues to make available their arrangements for the publication of quotes and transactions
Articles 3(3), 6(2), 8(3) and 10(2) of MiFIR
03/04/2017
Section 2 General Q&As on transparency topics
2
Flags and details for the purpose of post-trade transparency
Tables 3 and 4 of Annex I of RTS 1; Tables 2 and 3 of Annex II of RTS 2
15/11/2017
Section 2 General Q&As on transparency topics
3
Which investment firm reports
Article 12(4), (5) and (6) of RTS 1 and Article 7(5), (6) and (7) of RTS 2
03/04/2017
Section 2 General Q&As on transparency topics
4
Application of the transparency regime for primary transactions This Q&A was moved to the Manual of post-trade
Title II and III of MiFIR
03/04/2017
Section 2 General Q&As on transparency topics
5
ISINs for pre-trade transparency
Articles 3 and 8 of MiFIR
03/04/2017
Section 2 General Q&As on transparency topics
6
Use of 'PNDG' as price when making transactions public This Q&A was moved to the Manual of post-trade transparency on 10/07/2023
Articles 20 and 21 of MiFIR, Annex I of RTS 1, Annex II of RTS 2
03/04/2017
Section 2 General Q&As on transparency topics
7
RFQ systems
Annex I of RTS 1 and RTS 2
14/11/2018
Section 2 General Q&As on transparency topics
8
Application of post-trade transparency requirements by trading venues and SIs This Q&A was moved to the Manual of post-trade transparency on 10/07/2023
Articles 6 and 10 of MiFIR
03/10/2017
Table
Column 1
Column 2
Topic of the Question
Level issue
1/Level
2
Last Updated
Full table: see document.
Table
Column 1
Column 2
Topic of the Question
Level issue
1/Level
2
Last Updated
Full table: see document.
6
Publication of transactions in an aggregated form by APAs This Q&A was moved to the Manual of post-trade
Article 11(3)(a), and (d) of
(c) MiFIR
15/11/2017
7
Publication of transactions in an aggregated form by APAs This Q&A was moved to the Manual of post-trade transparency on 10/07/2023
Article 11(3)(a), and (d) of
(c) MiFIR
15/11/2017
8
Temporary suspension of transparency for bonds
Articles 9(4) 11(2) of MiFIR
and
15/11/2017
9
Geographical scope of the temporary suspension of transparency
Articles 9(4) 11(2) of MiFIR
and
15/11/2017
10
Default liquidity status of bonds This Q&A was moved to the Manual of post-trade transparency on 10/07/2023
Article 2(1)(17)(a) MiFIR
of
04/10/2018
11
The 'nominal value' of bonds This Q&A was moved to the Manual of post-trade transparency on 10/07/2023
Table 4 of Annex RTS 2
II of
18/12/2017
12
Scope of the trading obligation for interest rate derivatives
Commission Delegated Regulation 2017/2417
(CDR)
28/03/2018
13
Classification of derivatives on derivatives This Q&A was moved to the Manual of post-trade transparency on 10/07/2023
Annex III of RTS
2
04/10/2018
14
Scope of Article 9(1)(c) of MiFIR
Article 9(1)(c) MiFIR
of
04/10/2018
15
Default LIS and SSTI thresholds for bonds This Q&A was moved to the Manual of post-trade transparency on 10/07/2023
Articles 8, 9 and 11 of MiFIR and Articles 3,5,9 and 10 of RTS 2
04/01/2019
16
Money Market Instruments (MMIs) This Q&A was moved to the Manual of post-trade transparency on 10/07/2023
Article 11 of Commission Delegated Regulation (CDR) 2017/565
02/04/2019
17
Reporting of prime brokerage transactions This Q&A was moved to the Manual of post-trade
Article 7(7) Table 2 of Annex II RTS 2
and of
02/04/2019
18
Treatment of constant maturity swaps This Q&A was moved to the Manual of post-trade
Article 13 and Annex III of RTS 2
12/07/2019
19
Conversion of LIS/SSTI thresholds in lots This Q&A was moved to the Manual of post-trade
Article 13(9) RTS 2
29/05/2020
20
Default liquidity status, SSTI and LIS thresholds of non- equity instruments This Q&A was moved to the Manual of post-trade transparency on 10/07/2023
Article 13 of RTS 2
29/05/2020
21
Publication of transactions in an aggregated form
Article 11(3) of MiFIR and Article of RTS 2
11
29/05/2020
Table
Column 1
Column 2
Topic of the Question
Level issue
1/Level
2
Last Updated
Full table: see document.
Table
Column 1
Column 2
Topic of the Question
Level issue
1/Level
2
Last Updated
Full table: see document.
Section 7 Systematic internaliser regime
1
Schedule for the initial implementation of the systematic internaliser regime
Article 17 of Commission Delegated Regulation (EU) No 2017/565
the
29/01/2019
Section 7 Systematic internaliser regime
2
Level at which the firm must perform the calculation where it is part of a group or operatesEU branches
Articles 12 to 16 of the Commission Delegated Regulation (EU) No 2017/565
31/01/2017
Section 7 Systematic internaliser regime
3
Transactions that should be exempted from, and included in, the calculation
Articles 12 to 16 of the Commission Delegated Regulation (EU) No 2017/565
31/01/2017
Section 7 Systematic internaliser regime
4
Level of asset class at which the calculation should be performed for derivatives, bonds and structured finance products
Articles 13 to 15 of the Commission Delegated Regulation (EU) 2017/565
No
08/07/2020
Section 7 Systematic internaliser regime
5
Compliance with the quoting obligations for SIs in non-equity instruments
Article 18 of MiFIR
31/05/2017
Section 7 Systematic internaliser regime
6
Compliance with the SI regime and notification to NCAs
Articles 15(1) 18(4) of MiFIR
and
03/06/2019
Section 7 Systematic internaliser regime
7
Transactions that should be included in the calculations
Article 4(1)(20) MiFID II
of
03/10/2017
Section 7 Systematic internaliser regime
8
Commercial policy of access to quotes
Article 18(5) MiFIR
of
03/10/2017
Section 7 Systematic internaliser regime
9
Access to quotes
Article 18(7) MiFIR
of
03/10/2017
Section 7 Systematic internaliser regime
10
Price to be published by SIs in bonds and derivatives
Article 18 of MiFIR
15/11/2017
11
Mandatory SI regime
Article 4(1)(20) of MiFID II and Articles 14 to 18 of MiFIR
03/06/2019
11a
Voluntary SI regime
Article 4(1)(20) MiFID II
of
03/06/2019
11b
Quoting obligation for SI in non- TOTV instruments
Articles 14 to 18 MiFIR
of
03/06/2019
12
Quoting obligation for SIs in non-equity financial instruments
Article 18 of MiFIR
02/04/2019
13
Impact for SIs of an instrument changing liquidity status in between the SI determination dates
Article 14 to 22 of MiFIR and Articles 12 to 17 of the Commission Delegated Regulation (EU) No 2017/565
02/04/2019
Section 8 Data Reporting Services Providers
1
Reports from IF to APAS (time limit for sending the reports and clarification on possible disagreements between the investment firm and the APA) This Q&A was moved to the Manual of post-trade transparency on 10/07/2023
Articles 7, 11, 20 and 21 of MiFIR
31/05/2017
Section 8 Data Reporting Services Providers
2
Assignment of MICs to APAs
Annex I of RTS 1 and Annex II of RTS 2
31/05/2017
Section 8 Data Reporting Services Providers
3
Timeline for approving connections to ARMs to NCAs
Article 61(3) MiFID II
of
15/11/2017
Section 8 Data Reporting Services Providers
4
APA reports to competent authorities and ESMA This Q&A was moved to the Manual of post-trade transparency on 10/07/2023
Article 2 of RTS 3
01/02/2019
Table
Column 1
Column 2
Topic of the Question
Level issue
1/Level
2 Last Updated
Column 7
Full table: see document.
1 Introduction
Background
The final legislative texts of Directive 2014/65/EU (MiFID II) and Regulation (EU) No 600/2014 (MiFIR) were approved by the European Parliament on 15 April 201 and by the European Council on 13 May 201. The two texts were published in the Official Journal on 12 June 201 and entered into force on the twentieth day following this publication - i.e. 2 July 201.
Many of the obligations under MiFID II and MiFIR were further specified in the Commission Delegated Directive and two Commission Delegated Regulations 4, as well as regulatory and implementing technical standards developed by the European Securities and Markets Authority (ESMA).
MiFID II and MiFIR, together with the Commission delegated acts as well as regulatory and implementing technical standards will be applicable from 3 January 2018.
Purpose
The purpose of this document is to promote common supervisory approaches and practices in the application of MiFID II and MiFIR in relation to transparency topics. It provides responses to questions posed by the general public, market participants and competent authorities in relation to the practical application of MiFID II and MiFIR.
The content of this document is aimed at competent authorities and firms by providing clarity on the application of the MiFID II and MiFIR requirements.
The content of this document is not exhaustive and it does not constitute new policy.
Status
The question and answer (Q&A) mechanism is a practical convergence tool used to promote common supervisory approaches and practices under Article 29(2) of the ESMA Regulation.
Due to the nature of Q&As, formal consultation on the draft answers is considered unnecessary. However, even if Q&As are not formally consulted on, ESMA may check them with representatives of ESMA's Securities and Markets Stakeholder Group, the relevant Standing Committees' Consultative Working Group or, where specific expertise is needed, with other external parties.
ESMA will periodically review these Q&As on a regular basis to update them where required and to identify if, in a certain area, there is a need to convert some of the material into ESMA Guidelines and recommendations. In such cases, the procedures foreseen under Article 16 of the ESMA Regulation will be followed.
The Q&As in this document cover only activities of EU investment firms in the EU, unless specifically mentioned otherwise. Third country related issues, and in particular the treatment of non-EU branches of EU investment firms, are addressed in a dedicated third country section.
Disclaimer in relation to the answers provided by the European Commission in accordance with Article 16b(5) of the ESMA Regulation
These answers clarify provisions already contained in the applicable legislation. They do not extend in any way the rights and obligations deriving from such legislation nor do they introduce any additional requirements for the concerned operators and competent authorities. The answers are merely intended to assist natural or legal persons, including competent authorities and Union institutions and bodies in clarifying the application or implementation of the relevant legal provisions. Only the Court of Justice of the European Union is competent to authoritatively interpret Union law. The views expressed in the internal Commission Decision cannot prejudge the position that the European Commission might take before the Union and national courts.
Questions and answers
This document is intended to be continually edited and updated as and when new questions are received. The date on which each section was last amended is included for ease of reference.
2 General Q&As on transparency topics
[Last update: 03/06/2019]
Question 1 [Last update: 03/04/2017]
Do trading venues have to make available their arrangements covering asset classes beyond their current business?
Answer 1
No. Trading venues have to make available their arrangements for all asset classes for which they provide services but not beyond.
Question 2 [Last update: 15/11/2017]
a) How are the flags specified in Table 4 of Annex I of RTS 1 and Table 3 of Annex II of RTS 2 8 applied? Is it possible to combine flags?
b) How is the trade ID used in the case of aggregation of transactions?
c) Tables 3 and 4 of Annex I of RTS 1 and tables 2 and 3 of Annex II of RTS 2 require the publication of some information using text fields and 4-character codes that are not suitable for binary digital feeds. How should trading venues and investment firms/ Approved Publication Arrangements (APAs) ensure that transactions are published as close to realtime as technically possible? Is it possible to transport and publish the real-time data via digital feeds or does the data have to be transported and published in the reporting format defined in Annex I of RTS 1 and Annex II of RTS 2?
Answer 2
a) This Q&A was moved to the Manual of post-trade transparency on 10/07/2023.
b) This Q&A was moved to the Manual of post-trade transparency on 10/07/2023.
c) MiFIR and RTS 1 and RTS 2 intend to enable data-users to consume highly reliable and comparable sets of data in a fragmented market. This includes the trade flags and details defined by ESMA in Annex I of RTS 1 and Annex II of RTS 2. It is therefore important to ensure that trading venues, market operators and APAs efficiently disseminate unambiguous content.
RTS 1 and 2 do not require the use of a specific technical format (such as XML) for transporting and making data public. Encoding data feeds, including using binary digital feeds, for transportation purposes is therefore possible as long as it contributes to keeping the speed of transmission as close to real time as possible. What matters for meeting the post-trade transparency requirements in MiFIR and RTS 1 and 2 is that post-trade data is published as soon as possible and that the details and flags specified in Annex II of RTS 1 and 2 are used.
Trading venues and APAs have to make sure that at the point of converting digital realtime feed into human readable data points the details and flags as specified in Annex I of RTS 1 and Annex II of RTS 2 are used.
Question 3 [Last update: 03/04/2017]
a) Clarification on which investment firm has to report a transaction and on who is in charge of reporting back-to-back trades (Article 12(4), (5) and (6) of RTS 1 and Article 7(5), (6) and (7) of RTS 2)
b) In the case of OTC transactions that are reported to an APA by the investment firm selling the financial instrument, is it possible for the investment firm to outsource the posttransparency reporting requirement?
Answer 3
a) This Q&A was moved to the Manual of post-trade transparency on 10/07/2023.
b) Yes, the investment firm can outsource the reporting of OTC transactions to an APA to a third party. However, the investment firm will remain fully responsible for discharging its obligations under MiFID II/MiFIR. Moreover, in case of outsourcing the reporting of OTC transactions to a third party, the investment firm has to ensure that the third party informs the APA of the transparency regime applicable to the investment firm subject to the reporting obligation. This ensures that the APA is in a position to make the transaction
public using the transparency regime applicable to the investment firm subject to the reporting obligation.
Question 4 [Last update: 03/04/2017]
Is the transparency regime in MiFIR applicable to primary market transactions?
Answer 4
This Q&A was moved to the Manual of post-trade transparency on 10/07/2023.
Question 5 [Last update: 03/04/2017]
Does an ISIN need to be included for pre-trade quote publication?
Answer 5
Pre-trade transparency information should allow identifying unequivocally the financial instrument to which the information published refers. ISINs are one of the available ways to ensure the unequivocal identification of a financial instrument. However, ESMA recognises that ISINs may not always be available when providing a quote. Trading venues and systematic internalisers are free to use other ways for identifying instruments for pre-trade transparency purposes as long as the financial instrument can be unequivocally identified.
Question 6 [Last update: 15/11/2017]
Where the price of a transaction is not available at the time of execution (e.g. the Net Asset Value (NAV) for ETFs), how can investment firms fulfil their post-trade transparency obligations under Articles 20 and 21 of MiFIR and their transaction reporting obligations under Article 26 of MiFIR for those transactions?
Answer 6
This Q&A was moved to the Manual of post-trade transparency on 10/07/2023.
Question 7 [Last update: 14/11/2018]
a) When should the operator of an RFQ system provide pre-trade transparency?
b) Which quotes should be made public in a RFQ system?
c) Can an RFQ system be construed as a two-step process where (i) an RFQ is initiated and quotes are received in response to that RFQ, and (ii) the transactions are ultimately executed following a bilateral confirmation with one of the respondents?
Answer 7
a) Trading venues are responsible for designing their RFQ systems in compliance with the pre-trade transparency requirements defined in MiFIR and specified in Annex I of RTS 1 and RTS 2. The arrangements used may differ depending on the approach chosen by individual trading venues. Such approaches might include arrangements where trading interests become executable after a pre-defined period of time but would, in any circumstances, require the indications of interest to be disclosed no later than when they become actionable and in any case before the conclusion of a transaction. However, the conclusion of a transaction is not a condition for the publication of pre-trade transparency. Therefore, pre-trade transparency should also apply where a quote provided on request, including actionable indications of interest, is not acted upon.
The disclosure of the pre-trade quotes or actionable indications of interest only at the time of execution would not be consistent with the obligations set in Annex I of RTS 1 and 2.
b) A quote received in response to an RFQ that contains all the necessary information to agree on a trade and therefore complies with the definition of an actionable indication of interest as defined in Article 2(1)(33) of MiFIR should be made pre-trade transparent. The requirement within Annex I of RTS 1 and RTS 2 that quotes should be made public 'no later than when they become executable' is simply meant to ensure that all quotes are treated equally for the purpose of pre-trade transparency and can be published all at the same time. In any case the concept of executable quotes should not be interpreted in a way that would preclude quotes that qualify as A-IOIs to be made pre-trade transparent.
c) No, Annex I of RTS 1 and RTS 2 define RFQ systems as systems 'where a quote or quotes are provided in response to a request for quote submitted by one or more members or participants. The quote is executable exclusively by the requesting member or participant. The requesting member or participant may conclude a transaction by accepting the quote or quotes provided to it on request'. Therefore, the definition does not foresee the possibility to privately negotiate with one RFQ respondent to agree on the final details of the transaction. If such a bilateral negotiation is necessary it should be considered as a separate trading process outside the initial RFQ session.
Question 8 [Last update: 03/10/2017]
Do real time post-trade transparency requirements apply equally to trading venues and systematic internalisers?
Answer 8
This Q&A was moved to the Manual of post-trade transparency on 10/07/2023.
Question 9 [Last update: 15/11/2017]
a) Are trading venues, APAs and CTPs required to make data available free of charge for any length of time 15 minutes after publication?
b) Does MiFID II/MiFIR prevent trading venues, APAs and CTPs to apply usage restrictions, licensing and redistribution fees, including fees for deriving and/or manipulating data in automated applications for internal or external distribution, and non-monetary costs to market data - such as requirements on registrations, subscriptions and usage reporting on data which they make available free of charge 15 minutes after publication?
Answer 9
a) The information made available free of charge 15 minutes after its publication should replicate the information published on a reasonable commercial basis but with a 15 minutes delay. The information should be made available directly to end users. Where the trading venues makes the data available via third parties, this should not impose restrictions on access to that data to end users. Trading venues are not required to make any further replication of already published information available free of charge.
b) Trading venues, APAs and CTPs may not impose redistribution fees or other similar restrictions on redistributors/third parties making available data free of charge 15 minutes after the initial publication. Where a redistributor/third party charges fees for the distribution of data - including a general fee for accessing its services - trading venues, APAs and CTPs may impose redistribution fees or other similar restrictions on this redistributor/third party.
Furthermore, trading venues, APAs and CTPs may not charge fees or impose other similar restrictions on added-value services created by redistributors/third parties from data provided free of charge. Where a redistributor/third party charges for added-value services created from such data, trading venues, APAs and CTPs may impose fees or other similar restrictions to this redistributor/third party.
However, MiFIR/MiFID II only requires data to be published after 15 minutes free of charge and therefore, trading venues, APAs and CTPs may charge fees for the use and redistribution of historic data that is considered as an added-value service.
Question 10 [Last update: 14/11/2018]
How should trading venues, APAs and CTPs make data (pre- and/or post-trade data) available free of charge 15 minutes after publication and ensure non-discriminatory access to the information? What practices are not compatible with the requirement to make data available free of charge and ensure non-discriminatory access to the information?
Answer 10
ESMA expects trading venues, APAs and CTPs to make post-trade data, as well as pre-trade data, available free of charge 15 minutes after publication in an easily accessible manner for all potential users using a format that can be easily read, used and copied. This is without prejudice to Q&A 9(b) which allows, in certain cases, to charge fees or other similar restrictions on data. Furthermore, trading venues, APAs and CTPs are required to ensure the nondiscriminatory access to pre- and post-trade data, including for data made available free of charge.
Article 14 of RTS 13 requires APAs and CTPs to publish data in a machine readable way. In order to ensure that the information published by APAs and trading venues can be effectively and efficiently used by the public, ESMA expects that trading venues follow similar publication standards and publish data in a machine-readable way. In addition, APAs, CTPs and trading venues should also provide the data in a format that can be understood by an average reader.
ESMA considers that any practice designed to circumvent the provisions in Article 13(1) of MiFIR and Articles 64(1) and 65(1) and (2) of MiFID II is not compatible with the requirement to make data available free of charge 15 minutes after publication and ensure nondiscriminatory access to the information. This includes, but is not limited to, the following practices:
Imposing restrictions on access to the published data
In order to ensure that all potential users can access the information made available free of charge 15 minutes after publication, trading venues, APAs and CTPs should make clear instructions to the public on their website on how and where to access the data. The post-trade data should be available to anybody free of charge and in a format which can be understood by the average reader.
ESMA considers that publishing information on a website that is not accessible to everybody imposes restrictions on access to the data and does not meet the requirement for making information available free of charge. Similarly, the publication of data through third parties that do not charge specific fees for the relevant data but raise regular, for instance monthly or yearly, fees for subscribing to their services, does not meet the requirement to make information available free of charge. Furthermore, ESMA is of the view that allowing access to the data via a human interface only from ex ante registered IP addresses does not meet the requirement to make information available to the public free of charge. However, such a restriction is acceptable for data provided in a machine readable way.
Publishing information in a format that prevents users to read, use and copy the information
Trading venues, APAs and CTPs should publish information in an electronic format that can be directly and automatically read by a computer, and that can be accessed, read, used and copied by any potential user through computer software that is free of charge and publicly available.
ESMA does not consider that publishing data as an image (i.e. in such a way that the user cannot copy the data in a format that can be read by a computer) or requiring the purchase of a specific software for downloading, processing or reading the information meets the requirement of making data available free of charge.
Requiring market participants to submit search queries in order to access data
The data made available free of charge should be published in a similar format as real-time data published on a reasonable commercial basis.
ESMA does not consider that offering only publication arrangements whereby market participants are required to submit search queries in order to access limited portions of the data (e.g. ISIN-by-ISIN searches, limited time periods) meet the requirement of making data available free of charge, but such search queries could exist in addition.
Deleting data shortly after publication
The data made available free of charge should replicate the information published on a reasonable commercial basis but with a 15 minutes delay. ESMA is of the view that the information should be available for any party to initiate a retrieval of the data for a period of at least 24 hours from the publication. It is not reasonable to have the data available for a period that is not long enough for it to be downloaded reliably either on an ad-hoc or in a repeatable manner
No publication of post-trade data on transactions benefitting from a deferral
ESMA recalls that the obligation to make available post-trade data free of charge 15 minutes after publication applies also to transactions benefitting from a deferral. ESMA therefore expects that information on those transactions is made available on the same conditions as information on transactions not subject to deferred publication.
Question 11 [Last update: 29/05/2018]
How should the field 'publication date and time' be populated in the case of the use of deferrals or for amendments to trade reports?
Answer 11
This Q&A was moved to the Manual of post-trade transparency on 10/07/2023.
Question 12 [Last update: 29/05/2018]
How should voice trading systems apply the pre-trade transparency requirements of Article 8 of MiFIR?
Answer 12
Trading venues operating voice trading systems should ensure that pre-trade information is promptly made public through electronic means on a continuous basis during normal trading hours. The technical arrangements used by the trading venue should ensure that the pre-trade information advertised through its systems is current and that it is published as soon as it becomes actionable and in any case before the possible matching of the quotes occurs. However, the conclusion of a transaction is not a condition for the publication of pre-trade transparency. Therefore, pre-trade transparency should also apply where a quote provided on request, including actionable indications of interest, is not acted upon.
The voice system must be effectively operated by the trading venue to qualify as a trading protocol under Annex I of RTS 2. For example, an open outcry system maintained by a trading venue would qualify as a voice trading system. The venue would provide the facility where members can interact and conclude transactions through voice negotiation. The venue, by operating the voice trading system, would have access to and oversight over how trading interest is broadcasted, which will make possible the immediate publication of bids and offers and the attaching volumes and in any case before the possible matching of the quotes occurs.
Question 13 [Last update: 03/06/2019]
In case of a corporate action where a traded ISIN is replaced with a new ISIN, how should the new ISIN be reported to FIRDS and FITRS?
Answer 13
This Q&A was moved to the Manual of post-trade transparency on 10/07/2023.
3 Equity transparency [Last update: 30/09/2021]
Question 1 [Last update: 03/04/2017]
Are primary market transactions, block trades (accelerated book-building) and share buybacks subject to trading obligation for shares?
Answer 1
Primary market transactions (see Q&A 4 within the section on General Q&As on transparency topics) are not subject to the MiFIR transparency requirements and the trading obligation for shares. Block trades (accelerated book-building) and share buy backs on the other hand are secondary market transactions and therefore subject to the trading obligation for shares.
Question 2 [Last update: 15/11/2017]
What is the scope of the trading obligation where there is a chain of transmission of orders?
Answer 2
Article 23(1) of MiFIR determines the scope of the trading obligation for shares admitted to trading on a regulated market or traded on a trading venue by requiring investment firms to ensure that trades they undertake in shares take place on a regulated market, MTF, systematic internaliser or equivalent third country venue. Where there is a chain of transmission of orders concerning those shares all EU investment firms that are part of the chain (either initiating the orders or acting as brokers) should ensure that the ultimate execution of the orders complies with the requirements under Article 23(1) of MiFIR.
As an example, where an EU investment firm transmits an order for a share admitted to trading on a regulated market or traded on a trading venue to an EU investment firm that subsequently passes it on to a non-EEA firm, the EU investment firms should ensure the trade is undertaken in accordance with the requirements set out in Article 23 of MiFIR, i.e. on a regulated market, MTF, systematic internaliser or equivalent third country venue.
Question 3 [Last update: 30/09/2021]
In the case the transparency parameters (i.e. the most relevant market in terms of liquidity under Article 4 of MiFIR, the determination of the liquid market under Article 2(1)(17)(b) of MiFIR, the average daily turnover (ADT) for the identification of the large in scale thresholds for pre-trade and post-trade transparency under Articles 4(1)(c), 7(1) and 20(2) of MiFIR and the standard market size - SMS under Article 14(2) and (4) of MiFIR) are not available at a specific moment during the life cycle of the instrument (i.e. either at the start of trading based on estimates, after a 6 week period based on the first four week of trading, or afterwards based on the annual calculation), what are the temporary parameters to be applied until they are published by ESMA or the relevant non-delegating NCA? How should the transparency parameters be determined where the instrument is admitted to trading or traded on multiple trading venues?
Answer 3
This Q&A was moved to the Manual of post-trade transparency on 10/07/2023.
Question 4 [Last update: 04/01/2019]
When an executing broker executes a risk trade following the receipt of a request for market data (RFMD) from a client and then gives up that risk trade to another broker (e.g. a prime broker), how should this RFMD give-up be reported?
Answer 4
This Q&A was moved to the Manual of post-trade transparency on 10/07/2023.
Question 5 [Last update: 02/10/2019]
Which LIS threshold should be used to exclude post-trade large-in-scale transactions when calculating the turnover to be used for the average value of transactions calculation, which determines the SMS?
Answer 5
This Q&A was moved to the Manual of post-trade transparency on 10/07/2023.
4 Non-equity transparency [Last update: 31/03/2023]
Question 1 [Last update: 31/05/2017]
How is the term "an underlying physical asset" in the context of the definition of an Exchange For Physical (EFP) to be understood? Can a financial instrument be considered as a physical asset?
Answer 1
This Q&A was moved to the Manual of post-trade transparency on 10/07/2023.
Question 2 [Last update: 03/10/2017]
a) Which deferral regime applies to investment firms trading OTC?
b) Is it relevant in what Member State the relevant instrument is traded or admitted to trading on a trading venue?
Answer 2
a) This Q&A was moved to the Manual of post-trade transparency on 10/07/2023.
b) This Q&A was moved to the Manual of post-trade transparency on 10/07/2023.
Question 3 [Last update: 03/10/2017]
Publication of transactions in aggregated form (Article 11(3)(a) of MiFIR, Article 11(1)(a)(ii) of RTS 2): What happens if there are less than five transactions executed on the same day? Does this imply that no publication has to be made?
Answer 3
This Q&A was moved to the Manual of post-trade transparency on 10/07/2023.
Question 4 [Last update: 15/11/2017]
a) How is the requirement for a package order/transaction that 'Each component of the transactions bears meaningful economic or financial risk related to all the other components' to be interpreted?
b) Can package orders/transactions also include equity instruments? If yes, how is pre- and post-trade transparency applied?
c) When does an investment firm apply the systematic internaliser obligations on a package order level?
d) How should systematic internalisers determine whether package orders which are not liquid as a whole are subject to the transparency obligations in non-equity instruments under Article 18(1) or 18(2) of MiFIR?
e) Do the transparency obligations for systematic internalisers in non-equity instruments apply to a package which contains a component which is above the size specific to the instrument (SSTI)?
f) Which party to a package transaction is required to make the transactions public via an APA?
g) Can package orders (Article 2(1)(49)(b) of MiFIR) and package transactions (Article 2(1)(50)(b) of MiFIR) include components from more than one trading venue, i.e. packages composed of instruments traded on different venues (e.g. invoice spreads) or where one component is traded OTC (e.g. spread overs)?
h) Can package orders (Article 2(1)(49)(b) of MiFIR) and package transactions (Article 2(1)(50)(b) of MiFIR) also include instruments that are not admitted to trading or traded on a venue?
i) Where an investment firm buys a newly issued bond in the primary market as the result of an allocation and funds its investment by selling another bond to the lead manager of the issuance, simultaneously with and contingent upon the investment in the new issue, would this qualify as a package order for the purpose of pre-trade transparency?
Answer 4
a) The requirement of meaningful economic and financial risk related to all the other components (mefrroc) aims at ensuring that only components that are economically and financially related can constitute a package order/transaction, and to avoid that components that are not economically or financially related in a meaningful manner are
declared as a package order/transaction with the main objective of benefitting from the transparency regime for package orders/transactions.
ESMA expects trading venues and market participants trading packages to document how the meffroc requirement is met, either in the contract specifications for packages traded on trading venues or on a package-by-package basis in case of OTC-transactions.
b) No they cannot. Package orders/transactions have to be exclusively composed of nonequity instruments. The waivers/deferrals for packages are available under Articles and 11 of MiFIR, which cover only non-equity instruments.
c) For pre-trade transparency obligations to apply at package order level, including for an exchange for physical, an investment firm must be a systematic internaliser in all financial instrument components of the order. Where an investment firm is prompted for a quote for a package order for which it is a systematic internaliser only for some components, the investment firm can decide either to provide a firm quote for the whole package or only for the components for which it is a systematic internaliser.
d) Article 18(2) of MiFIR allows for systematic internalisers to waive transparency obligations in non-liquid instruments provided the conditions set out in Article 9(1) of MiFIR are met. When a package order contains at least one component that does not have a liquid market and the package order as a whole has not a liquid market, it will be eligible for transparency waivers under Article 18(2) of MiFIR. When the package has only liquid components, the transparency obligations for liquid instruments under Article 18(1) of MiFIR will apply.
e) Article 18(10) of MiFIR exempts systematic internalisers from their transparency obligations when they deal in a size that is above the SSTI. In the case of package orders, Article 9(1)(e)(iii) of MiFIR allows for the package order to qualify for a waiver if all of its components are above SSTI.
Therefore, where the investment firm is a systematic internaliser in all components of the package order, all components of the package need to be above SSTI in order to qualify for the waiver. In case the investment firm is not a systematic internaliser in all instruments and decides to provide a quote only for the component(s) for which it is a systematic internaliser, the quoting obligations apply only for a quoted size of below or up to the SSTI of the respective components.
f) This Q&A was moved to the Manual of post-trade transparency on 10/07/2023.
g) Yes, the definition of package orders in Article 2(1)(49)(b) of MiFIR and package transactions in Article 2(1)(50) of MiFIR, does not specify the method of execution of the different legs of the package. ESMA is therefore of the view that, as long as the order/transaction meets all conditions under Article 2(1)(49)(b) and (50)(b) of MiFIR, the different components of the package can be traded on different venues or OTC.
h) No. Package orders as defined in Article 2(1)(49) of MiFIR and package transactions as defined in Article 2(1)(50)(b) of MiFIR can only be composed of instruments that are admitted to trading or traded on a trading venue.
i) No. Since primary transactions are not subject to transparency (see General Q&A 4 on transparency issues), they should not be considered when assessing whether components executed together qualify as a package order.
Question 5 [Last update: 03/10/2017]
What are normal trading hours for non-equity instruments? Are investment firms allowed to postpone publication of transactions until the opening of the next trading day in respect of trades in non-equity instruments taking place outside of normal trading hours?
Answer 5
This Q&A was moved to the Manual of post-trade transparency on 10/07/2023.
Question 6 [Last update: 15/11/2017]
How should an APA aggregate transactions in order to publish them in case it is requested/allowed by the regime applicable to the investment firm?
Answer 6
This Q&A was moved to the Manual of post-trade transparency on 10/07/2023.
Question 7 [Last update: 15/11/2017]
What is the minimum number of transactions in order for trading venues and APAs to publish transactions in an aggregated form under Article 11(3)(c) or 11(3)(d) of MiFIR?
Answer 7
This Q&A was moved to the Manual of post-trade transparency on 10/07/2023.
Question 8 [Last update: 15/11/2017]
How is the concept of 'class of bonds' to be understood in respect of the temporary suspension of transparency?
Answer 8
Since the suspension of transparency under Article 9(4) and 11(2) of MiFIR applies at a class level, with respect to bonds, the classes of bonds defined in Table 2.2 Annex III of RTS 2 should be used.
Question 9 [Last update: 15/11/2017]
Would the temporary suspension of transparency requirements apply to all the venues on which the class of instruments is traded or rather on venue-by-venue basis?
Answer 9
While the calculations to identify whether liquidity has fallen below the thresholds specified under Article 16 of RTS 2 have to be performed at EU level, the actual suspension of the transparency obligations remains under the competences of each competent authority (CA) and therefore has to be activated on a jurisdiction-by-jurisdiction basis.
As a consequence, for classes of financial instruments where trading takes place on venues located in different Member States, the CA of each of those Member States will have the possibility, where the conditions set out in Article 16 of RTS 2 are met, to activate the temporary suspension mechanism independently of the decision to be taken by others.
Question 10 [Last update: 04/10/2017]
In case the liquidity assessment for a bond under Article 2(1)(17)(a) of MIFIR as further specified in Article13(18), (19) and (20) of RTS 2 is not published, what is the liquidity status of the bond to be applied until it is published by ESMA or the relevant non-delegating NCA?
Answer 10
This Q&A was moved to the Manual of post-trade transparency on 10/07/2023.
Question 11 [Last update: 18/12/2017]
How should the 'nominal value' of bonds referred to in Table 4 of Annex II of RTS 2 be calculated?
Answer 11
This Q&A was moved to the Manual of post-trade transparency on 10/07/2023.
Question 12 [Last update: 28/03/2018]
Does the trading obligation for derivatives as specified in Commission Delegated Regulation (EU) 2017/2417 9 apply to non-par swaps?
Answer 12
No, the trading obligation for derivatives only applies to interest rate swaps as specified in table 1-3 of Commission Delegated Regulation (EU) 2017/2417 that are traded at par. Non-par swaps, including swaps traded at market-agreed-coupon (MAC), are currently not subject to the trading obligation for derivatives.
Question 13 [Last update: 04/10/2018]
How should derivatives on derivatives be treated pursuant to RTS 2 for the purpose of determining whether they have a liquid market and, accordingly, the SSTI and LIS thresholds?
Answer 13
This Q&A was moved to the Manual of post-trade transparency on 10/07/2023.
Question 14 [Last update: 04/10/2018]
What types of derivatives can benefit from the pre-trade transparency waiver provided under Article 9(1)(c) of MiFIR?
Answer 14
Only derivatives that are both (i) not subject to the trading obligation specified in Article 28 of MiFIR and (ii) for which there is not a liquid market can benefit from the pre-trade transparency waiver set out under Article 9(1)(c) of MiFIR.
Question 15 [Last update: 04/01/2019]
In case the large in scale (LIS) and size specific to the instrument (SSTI) thresholds for pretrade and post-trade transparency for a bond are not published by ESMA or the relevant nondelegating NCA, what would be the applicable thresholds?
Answer 15
This Q&A was moved to the Manual of post-trade transparency on 10/07/2023.
Question 16 [Last update: 02/04/2019]
Are reverse convertible bonds (i.e bonds that can be converted to cash, debt, or equity at the discretion of the issuer at set dates), zero coupon bonds (i.e bonds issued at discount) and bonds that are issued as fixed rate with an initial coupon rate equal to 0 (that can also be increased in the course of the life of the bond) considered to be Money Market Instruments (MMIs) as per Article 11 of CDR 2017/565?
Answer 16
This Q&A was moved to the Manual of post-trade transparency on 10/07/2023.
Question 17 [Last update: 02/04/2019]
Regarding a non-equity transaction concluded outside the rules of a trading venue pursuant to a customary prime brokerage arrangement (PB transaction), where a client of a prime broker (PB) agrees on the terms of a PB intermediated trade with an executing broker (EB) and then the client and/or the EB gives up the trade to the PB for its acceptance,
a) who should make public the post-trade information?
b) which should be the timestamp of the transaction (field 'trading date and time' of table 2 of Annex II of RTS 2)?
Answer 17
a) This Q&A was moved to the Manual of post-trade transparency on 10/07/2023.
b) This Q&A was moved to the Manual of post-trade transparency on 10/07/2023.
Question 18 [Last update: 12/07/2019]
How should constant maturity swaps be treated pursuant to RTS 2 for the purpose of determining whether they have a liquid market and, accordingly, the SSTI and LIS thresholds?
Answer 18
This Q&A was moved to the Manual of post-trade transparency on 10/07/2023.
Question 19 [Last update: 29/05/2020]
How should trading venues convert large in scale (LIS) and size specific to the instrument (SSTI) thresholds into lots under Article 13(9) of RTS 2?
Answer 19
This Q&A was moved to the Manual of post-trade transparency on 10/07/2023.
Question 20 [Last update: 29/05/2020]
In case the liquidity assessment, the large in scale (LIS) and size specific to the instrument (SSTI) thresholds for pre-trade and post-trade transparency for a non-equity instrument - other than a bond (except ETCs and ETNs) - under Article 2(1)(17)(a) of MIFIR as further specified in Article13(1), (2) and (3) of RTS 2 is not published, what is the liquidity status of the instrument to be applied until it is published by ESMA or the relevant non-delegating NCA?
Answer 20
This Q&A was moved to the Manual of post-trade transparency on 10/07/2023.
Question 21 [Last update: 29/05/2020]
Should APAs and trading venues update the publication of transactions in an aggregated form (Article 11(3) of MiFIR) if a transaction that has been included in the publication is subsequently cancelled or amended? What steps should trading venues and APAs follow in case of late reporting of trades in the context of publication of transactions in an aggregated form?
Answer 21
This Q&A was moved to the Manual of post-trade transparency on 10/07/2023.
Question 22 [Last update: 30/09/2021]
How should Field 25 in Table 2 of Annex IV of RTS 2, the 'IR Term of contract', be populated?
Answer 22
This Q&A was moved to the Manual of post-trade transparency on 10/07/2023.
Question 23 [Last update: 20/05/2022]
How should Field 24 in Table 2 of Annex IV of RTS 2, the 'Reference rate', be populated when the reference rate is not included in the {INDEX} list?
Answer 23
This Q&A was moved to the Manual of post-trade transparency on 10/07/2023.
Question 24 [Last update: 20/05/2022]
Which characteristics should prevail in the classification of a bond: its 'structure' or its 'issuer'?
Answer 24
This Q&A was moved to the Manual of post-trade transparency on 10/07/2023.
Question 25 [Last update: 31/03/2023]
Field 14 'Delivery/cash settlement location' in Table 2 of Annex IV of RTS 2 (transparency reference data), as amended by [Amending Regulation RTS 2], should be populated with a standard code (Energy Identification Code - 'EIC') for electricity and gas contracts. How should Field 14 'Delivery/cash settlement location' for electricity and gas contracts be reported for a) cash settled contracts; b) contracts for which an EIC is not available?
Answer 25
This Q&A was moved to the Manual of post-trade transparency on 10/07/2023.
5 Pre-trade transparency waivers [Last update: 12/07/2019]
Question 1 [Last update: 03/06/2019]
Does paragraph 7 of Article 4 of MiFIR allow competent authorities to grandfather waivers granted under MiFID I for a period of 2 years after the application of MiFIR on 3 January 2018?
Answer 1
Paragraph 7 of Article 4 of MiFIR provides for a review of the waivers granted in accordance with MiFID I (i.e. before 3 January 2018) to be carried out by relevant national competent authorities (NCAs) in order to assess the continued compatibility of those waivers with MiFIR. ESMA must conclude the review and issue an opinion on each of the waivers to the relevant NCA by 3 January 2020. As clarified under Recital 13 of MiFIR the review should be carried out in accordance with Article 29 of ESMA Regulation 1095/20 to foster consistency in supervisory practices and, therefore, ensure uniform application of MiFIR. The 2-year period following the application of MiFIR aims to alleviate the possible operational challenges involved in reviewing all of the waivers already granted across the Union to ensure a smooth convergence process in the supervisory practices between NCAs.
The 2-year period following application of MiFIR should not be interpreted as a grandfathering of waivers granted in accordance with MiFID I. MiFIR applies from 3 January 2018 and trading venues are required to comply with the new requirements from that date. That means that trading venues must, depending on the type of waiver used, implement the necessary technical modifications to their systems and regulatory changes to their rules to ensure compliance when MiFIR applies.
Question 2 [Last update: 18/11/2016]
Which procedure applies to granting a waiver from pre-trade transparency obligations for nonequity financial instruments for which there is not a liquid market under Article 9(1)(c) of MiFIR?
Answer 2
All waivers from pre-trade transparency under Article 9(1) of MiFIR originate with an application for a waiver by a trading venue which may then be granted by the relevant NCA. Each waiver also has to go through an ESMA opinion process as described in Article 9(2) of MiFIR.
The waiver for illiquid instruments described in Article 9(1)(c) of MiFIR is special in that it does not apply to specific order types or sizes, but that it renders all non-equity instruments deemed illiquid under MiFIR and RTS 2 for non-equity transparency eligible for a waiver from pre-trade transparency. ESMA expects an extremely large number of instruments will be eligible for this waiver, and considers that it would not be possible operationally for this waiver to be granted on a per-instrument basis. Furthermore, ESMA does not understand the legal text to impose an obligation to grant the waiver on a per instrument basis.
Instead ESMA considers that the asset classes of instruments as categorised in Annex III of RTS 2 (examples for asset classes are bonds, interest rate derivatives, commodity derivatives, credit derivatives, etc.) should be the basis for applying for the 'illiquid waiver'. This means that trading venues should apply for the waiver on an asset class basis and all illiquid instruments that fall within those asset classes which are already traded on the venue or in the process of being admitted to trading, or that will be traded on the venue at a later point in time would be eligible to benefit from the waiver, if granted. Also instruments within the specified asset classes which move from liquid to illiquid following the calculations as per RTS 2 would be eligible to benefit from the same waiver.
Each waiver application can comprise different asset classes so that trading venues would only have to apply for the illiquid waiver once in the run-up to MiFID II application. A new waiver application would only be necessary in case the trading venue intends to start trading a new asset class based on the categorisation in RTS 2.
Question 3 [Last update: 31/05/2017]
When a modification is required to a trading venue system that benefits from a waiver granted in accordance with MiFID I in order to make it compliant with MiFIR, what is the appropriate process?
Answer 3
There will be varying degrees of modifications that will need to be made to existing waivers granted in accordance with MiFID I in order to make them compliant with MiFIR. Trading venues should consider whether modifications to their systems that benefit from waivers granted in accordance with MiFID I are necessary to make them MiFIR compliant. In some cases, the modifications could constitute a new waiver and consequently go through the ESMA opinion process before MiFIR applies. Systems for which waivers were granted in accordance with MiFID I that only require non-substantial modifications to be MiFIR compliant are not expected to go through a waiver application process, however they will be subject to the review that ESMA is required to conclude by 3 January 2020. In this regard, non-substantial modifications may include, but are not limited to, the following examples:
For reference price waivers: when the reference price currently based on best bid, best offer or mid-price is modified to utilise only the midpoint within the bid and offer prices (or, when it is not available, the opening or closing price of the relevant trading session), in accordance with Article 4(2) of MiFIR;
For order management facility waivers: when they are modified by introducing a minimum order size for orders held in an order management facility pending disclosure, in accordance with Article 8(2) of RTS 1;
For large in scale waivers: when the minimum size is modified to be in accordance with table 1 of Annex II of RTS 1.
Combination of waivers will be assessed on an individual basis and amendments may qualify as non-substantial depending on the circumstances.
The transparency and waiver regimes under MiFID I only apply to shares admitted to trading on a regulated market. Therefore, where a waiver granted in accordance with MiFID I is extended to other equity-like instruments (i.e. ETFs, depositary receipts, certificates or any other equity-like instruments as well as non-equity instruments), this is considered as granting a new waiver, and this new waiver needs to go through the ESMA opinion process.
Question 4 [Last update: 31/05/2017]
How should the 'current volume weighted spread reflected in the order book' be calculated for negotiated transactions under Article 4(1)(b)(i) of MiFIR?
Answer 4
The volume weighted spread should be calculated as the spread between the volume weighted bid and offer prices of orders on the trading venue's public order book aggregated to the size of the negotiated transaction.
The volume weighted bid (offer) should be calculated considering all bid (sell) orders in the order book that would theoretically be executed if a sell (buy) order of a size equivalent to the negotiated transaction was introduced in the order book. Where the transaction size is larger than the volume of buy (sell) orders on the order book it will be the average price of the transaction assuming that a sell (buy) order is executed against all buy (sell) orders on the order book.
Orders benefitting from a pre-trade transparency waiver should not be included in the calculation.
Question 5 [Last update: 15/11/2017]
What is the maximum authorised deviation around the reference price to be used for negotiated transactions in illiquid instruments?
Answer 5
Article 4(1)(b)(ii) of MiFIR allows NCAs to grant pre-trade transparency waivers to trading venues for negotiated transactions in illiquid instruments where those negotiated transactions are dealt within a percentage of a suitable reference price.
ESMA is of the view that the parameters to be set by trading venues in accordance with Article 48(5) of MiFID II for halting trading can also be used as maximum limits for the purposes of Article 4(1)(b)(ii) of MiFIR. The parameters to be established for trading halts should be calibrated by taking into consideration the liquidity of financial instruments, the related market model and the type of users trading those instruments. A price movement beyond these limits would be considered significant enough to halt trading, therefore, ESMA considers these same parameters should be used as a proxy to assess the suitability of the reference price and the percentage deviation from it that can be used for negotiated transactions under Article 4(1)(b)(ii) of MiFIR. NCAs should not authorise trading venues to report negotiated transactions in illiquid financial instruments executed outside those limits.
Question 6 [Last update: 15/11/2017]
Do the waivers under Article 9(1)(a) of MiFIR in respect of Large in Scale (LIS) orders and Article 9(1)(b) of MiFIR for actionable indications of interest (A-IOI) that are above a size specific to the financial instrument (SSTI) persist during the life of that particular order regardless of any partial execution?
Answer 6
Article 7(5) of RTS 1 allows the Large in Scale (LIS) waiver pursuant to Article 4(1)(c) of MiFIR to continue to apply in respect of an order that is LIS when entered into an order book but that, following partial execution, falls below the threshold applicable for that financial instrument, unless the price or other relevant conditions for the execution of an order are amended. There should be no difference in approach for equity and equity-like instruments and non-equity instruments and the same treatment should apply to the remaining portion of a partially executed LIS order in an order book in a non-equity instrument.
In relation to A-IOI that may benefit from the waiver pursuant to Article 9(1)(b) of MiFIR, each A-IOI must be above the relevant SSTI threshold for that financial instrument specified in Annex III of RTS 2. The waiver is not available for trading protocols other than request-forquote and voice trading systems, which exclude order books. If an A-IOI above the SSTI is partially executed, the remaining amount of the A-IOI should be considered a new A-IOI and so the relevant waiver checks should be carried out again for the SSTI waiver to apply.
Question 7 [Last update: 15/11/2017]
What arrangements should trading venues put in place to ensure the proper calculation of indicative pre-trade prices in relation to Article 8(4) of MiFIR?
Answer 7
To use the waiver pursuant to Article 9(1)(b) of MiFIR, the market operator or investment firm operating the trading venue must be capable of providing the information on indicative prices as per Article 8(4) of MiFIR and Article 5(2) of RTS 2. The following three conditions are important to ensure the requirements are correctly interpreted:
The voice trading/RFQ system must be a trading protocol operated by the trading venue. That means that the venue must have access to the actionable indications of interest (A-IOI) that are broadcasted through that system;
The A-IOI must originate from within that voice trading/RFQ system;
The A-IOI must be above the relevant size specific to the financial instrument (SSTI) threshold for that financial instrument but below the Large in Scale (LIS) threshold for that financial instrument.
Furthermore, indicative prices must be based only on A-IOI above SSTI but below LIS broadcast within the voice trading or RFQ system itself at the time there is trading interest.
Question 8 [Last update: 18/12/2017]
Should subscription rights be treated as equity instruments or non-equity instruments?
Answer 8
This Q&A was moved to the Manual of post-trade transparency on 10/07/2023.
Question 9 [Last update: 18/12/2017]
What is the process to be followed by systematic internalisers in order to waive the obligation in Article 18(2) of MiFIR?
Answer 9
Article 18(2) of MiFIR states that for non-equity instruments for which there is not a liquid market, systematic internalisers are required to disclose quotes to their clients on request if they agree to provide a quote.
However, the obligation can be waived where the conditions in Article 9(1) of MiFIR are met. The conditions in Article 9(1) are:
Article 9(1)(a): the order is large in scale (LIS);
Article 9(1)(b): actionable indications of interest which are above the size specific to the instrument (SSTI);
Article 9(1)(c): derivatives which are not subject to the trading obligation and other financial instruments for which there is not a liquid market;
Article 9(1)(d): orders for the purpose of executing an exchange for physical; and
Article 9(1)(e): package orders that meet one of the following criteria (i) at least one of its components is a financial instrument for which there is not a liquid market, unless there is a liquid market for the package order as a whole; (ii) at least one of its components is large in scale compared with the normal market size, unless there is a liquid market for the package order as a whole; (iii) all of its components are executed on a request-for-quote or voice system and are above the size specific to the instrument.
An NCA may allow any systematic internaliser within its jurisdiction to waive the obligation in Article 18(2) of MiFIR provided it complies with the relevant requirements and conditions set in Article 9(1) of MiFIR. Alternatively, an NCA may allow systematic internalisers in its jurisdiction to waive the obligation on the basis of individual applications.
This waiver can be applied to all illiquid products on an asset class level rather requiring a waiver for each instrument. On the basis of an individual waiver application from an investment firm that is granted by the relevant NCA, a new waiver application would only be necessary in case the investment firm for the first time becomes a systematic internaliser in a new asset class based on the categorisation in RTS 2, for which it has not already obtained a waiver.
Question 10 [Last update: 18/12/2017]
How will the reference price waiver be applied for shares listed on multiple venues and traded in different currencies? Should those shares be regarded as separate financial instruments, which may only be traded in the currency in which they are listed?
Answer 10
The concept of financial instrument in MiFID II / MiFIR is independent of the currency that it is traded in. Therefore, instruments should not be considered as different financial instruments, just because they are traded on multiple venues and/or in multiple currencies.
According to Article 4(2) of MiFIR, the reference price is to be 'derived' from the trading venue where that financial instrument was first admitted to trading or the most relevant market in terms of liquidity and not replicated. This leaves open the possibility to transact in currencies other than the currency that is used on the trading venue from which the price is derived. The methodology used for converting the reference price should be set out in the trading venue's rule book. The exchange rate used should be derived from a reliable source (e.g. European Central Bank) and be updated regularly and at least on a daily basis.
Question 11 [Last update: 12/07/2019]
Are 'pre-arranged' or 'negotiated' transactions permitted for transactions in non-equity instruments and in particular for derivatives that are subject to the MiFIR trading obligation? Under which conditions can pre-arranged transactions benefit from the hedging exemption under Article 8(1) of MiFIR?
Answer 11
MiFIR provides for the possibility to formalise negotiated transactions in equity instruments on trading venues subject to a waiver under Article 4(1)(b). Furthermore, ESMA considers that pre-arranged transactions in equity instruments may also be formalised under the large in scale (LIS) waiver under Article 4(1)(c) of MiFIR as long as the conditions for an LIS waiver are met.
While MiFIR does not have specific provisions for negotiated or pre-arranged transactions for non-equity instruments, ESMA considers it nevertheless possible to formalise negotiated or pre-arranged transactions on a trading venue subject to meeting the conditions for the respective waivers from pre-trade transparency set out in Article 9(1) of MiFIR.
Concerning non-equity instruments that are not subject to the trading obligation for derivatives, pre-arranged transactions are possible under the LIS-waiver (first part of the sentence in Article 9(1)(a)) of MiFIR), the waiver for instruments that do not have a liquid market (Article 9(1)(c) of MiFIR), the EFP waiver (Article 9(1)(d) of MiFIR) and the package order waiver (Article 9(1)(e) of MIFIR). Pre-arranged transactions may not be executed using the order management facility waiver (second part of Article 9(1)(a) of MiFIR) or the size-specific-to-theinstrument (SSTI)-waiver (Article 9(1)(b) of MiFIR).
Concerning derivatives subject to the trading obligation, pre-arranged transactions are only possible under the LIS-waiver (Article 9(1)(a) of MiFIR) and the package order waiver (Article 9(1)(e) of MiFIR).
Finally, concerning pre-arranged transactions on cleared derivatives that are concluded on a trading venue, the pre-trade checks specified in the Commission Delegated Regulation (EU) 2017/582 (Article 2) do also apply.
Moreover, ESMA considers that pre-arranged transactions may benefit from the hedging exemption under Article 8(1) of MiFIR subject to meeting the following conditions: at least one of the counterparties to the transaction is a non-financial counterparty, the transaction is in derivative instruments, and the transaction has to have as a result reducing risks directly relating to the commercial activity or treasury financing activity of the non-financial counterparty or of that group.
ESMA emphasizes that when trading venues execute pre-arranged transactions under the rules of their system, they must ensure that these transactions comply with the regulations, including those concerning market abuse and disorderly trading. Venues have an obligation to monitor these trades on possible violations of the rules.
Question 11a [Last update: 12/07/2019]
Is the hedging exemption applicable to orders or quotes?
Answer 11a
No, according to Article 8(1) of MiFIR the hedging exemption applies to 'derivative transactions'. ESMA is therefore of the view that the hedging exemption may only be used for the formalisation of pre-arranged derivative transactions and is not applicable to orders or quotes. For instance, orders submitted to a central limit order book or quotes provided in response to a request for quote have to be made pre-trade transparent unless they are eligible for a waiver from the pre-trade transparency obligation.
Question 12 [Last update: 07/02/2018]
How should the minimum size of orders held in an order management facility of a trading venue pending disclosure be calculated for non-equity instruments?
Answer 12 - deleted.
The amended RTS 2 which applies since 5 June 2023, provides for this requirement.
Question 13 [Last update: 26/05/2023]
Is it possible to execute cross orders in liquid non-equity instruments below the large in scale (LIS) thresholds on a trading venue?
Answer 13
MiFIR requires that all orders in non-equity instruments are subject to pre-trade transparency unless the order benefits from a waiver from pre-trade transparency. However, ESMA considers it possible to cross orders (buy and sell orders from the same member or two members having prior knowledge of the orders) on a trading venue subject to certain conditions. In that respect, cross orders in liquid instruments below the LIS thresholds which are subject to pre-trade transparency and to which no pre-trade transparency waiver applies can be matched on a trading venue only when the venue ensures that other market participants are given a reasonable chance to interact in a competitive way with the crossing, including via a waiting period before matching. Trading venues shall set the parameters of the waiting period by taking into account the technological capacities to price the financial instrument concerned and route associated orders.
6 The double volume cap mechanism [Last update: 28/01/2022]
Question 3 [Last update: 03/10/2016]
How will the DVC be applied to newly issued shares?
Answer 3
ESMA will publish the percentage of trading in a financial instrument carried out under the reference price waiver and the negotiated transactions waiver under Article 4(1)(b)(i) of MiFIR for shares newly admitted to trading or traded from the start of trading.
However, since according to Article 5(1) of MiFIR the double volume cap mechanism can only apply where the relevant thresholds are breached over the previous 12 months, the suspension of waivers when the thresholds are breached can only be triggered when at least 12 months of data for the volume of total trading and the percentage carried out under the waivers is available.
Question 4 [Last update: 03/10/2016]
What are the implications of exceeding a relevant threshold in a mid-month report?
Answer 4
Pursuant to Article 5(4) of MiFIR ESMA shall publish within five working days of the end of each calendar month, the total volume of Union trading per financial instrument in the previous 12 months, the percentage of trading in a financial instrument carried out across the Union under the waivers and on each trading venue in the previous 12 months, and the methodology that is used to derive at those percentages.
In the event that the report referred to in Article 5(4) of MiFIR identifies any trading venue where trading in any financial instrument carried out under the waivers has exceeded 3,75 % of the total trading in the Union in that financial instrument or that overall Union trading in any financial instrument carried out under the waivers has exceeded 7,75 % based on the previous 12 months' trading, respectively, ESMA shall publish an additional report within five working days of the 15th day of the calendar month in which the report referred to in Article 5(4) of MiFIR is published. That report shall contain the information specified in Article 5(4) in respect of those financial instruments where 3,75 % has been exceeded or in respect of those financial instruments where 7,75 % has been exceeded, respectively (see Article 5(5) and (6) of MiFIR).
The question is what the consequences are if according to the aforementioned 'mid-month reports' one or more of the respective thresholds (the 3,75%, the 7,75%, the 4% or the 8%) are exceeded.
Pursuant to Article 5(2) of MiFIR, the NCA that authorised the use of the respective waivers shall within two working days suspend their use on that venue in that financial instrument based on the data published by ESMA referred to in Article 5(4) of MiFIR, for a period of six months when the percentage of trading in a financial instrument carried out on a trading venue under the waivers has exceeded the limit referred to in Article 5(1)(a) of MiFIR. When the percentage of trading in a financial instrument carried out on all trading venues across the Union under those waivers has exceeded the limit referred to in Article 5(1)(b) of MiFIR, all NCAs shall within two working days suspend the use of those waivers across the Union for a period of six months.
On this basis the obligation to suspend trading derives from the thresholds as laid down in Article 5(1) of MiFIR. However, factually, suspension for a period of six months is ordered by the NCA on the basis of the ESMA report pursuant to Article 5(4) of MiFIR, as explicitly stated in Article 5(2) and (3), respectively. As a trading suspension is ordered on the basis of the report pursuant to Article 5(4) and as the legal hook for a trading suspension does not crossrefer to the mid-months reports pursuant to Article 5(5) and (6), there is no direct legal consequence of these reports even if they were to state that trading has exceeded 4 % or 8 %, respectively.
Question 5 [Last update: 12/07/2018]
In case of a corporate action where a traded ISIN is replaced with a new ISIN, how will the new ISIN be treated for the purposes of the DVC?
Answer 5
In case of a corporate action, where a traded ISIN is replaced with a new ISIN, the new ISIN will be treated as a newly admitted to trading or newly traded financial instrument and the ESMA DVC calculations and publication will not take the trading activity of the old ISIN into account.
In addition, while ESMA will publish the percentage of trading in this financial instrument carried out under the reference price waiver and the negotiated transaction waiver from the start of trading, suspensions following the breach of the thresholds set out under Article 5 of MiFIR should only be triggered when at least 12 months of data for the new ISIN is available.
ESMA is however reflecting on ways and means to ensure more continuity in the treatment of financial instruments subject to corporate actions and might decide to revisit this approach in the future.
Question 6 [Last update: 28/01/2022]
When a trading venue starts operating or admits or trades an equity or equity-like financial instrument for the first time, who has the responsibility to check whether the respective instrument is already subject to an EU level suspension under the Double Volume Cap mechanism?
Answer 6
Before a trading venue starts operating as well as before an instrument is admitted to trading or traded on a trading venue for the first time, that trading venue should verify whether the respective instrument(s) is(are) traded on other trading venues and is(are) subject to an EU level suspension under the Double Volume Cap mechanism. In case of an active suspension, the start of the operations or the admission to trading or trading can still take place but trading under the waivers as per Articles 4(1)(a) and 4(1)(b)(i) of MiFIR should not be allowed until the end of the suspension for the concerned instrument(s).
7 The systematic internaliser regime [Last update: 08/07/2020]
Question 1 [Last update: 30/01/2019]
By when will ESMA publish information about the total number and the volume of transactions executed in the Union and when do investment firms have to perform the assessment whether they should be considered as systematic internalisers for the first time as well as for subsequent periods?
Answer 1
Commission Delegated Regulation (EU) No 2017/565 10 does not provide for any transitional provision which would allow the systematic internaliser regime to be fully applicable as of 3 January 2018. In the absence of such provisions, the first calculations are expected to be performed only when, in accordance with Article 17 of the Commission Delegated Regulation (EU) No 2017/565, there will be 6 months of data available.
In accordance with the clarifications provided below:
a) ESMA will publish the necessary data (EU wide data) for the first time by:
i. 1 August 2018 covering a period from 3 January 2018 to 30 June 2018 for equity, equity-like and bond instruments;
ii. The EU wide data for ETCs, ETNs, SFPs, securitised derivatives, emission allowances and derivatives will not be published until at the latest 2020.
b) Investment firms will have to perform their first assessment and, where appropriate, comply with the systematic internaliser obligations (including notifying their NCA) by:
i. 1 September 2018 for equity, equity-like and bond instruments;
ii. No assessment has to be performed for ETCs, ETNs, SFPs securitised derivatives, emission allowances and derivatives until at the latest 2020.
This timeline applies also to investment firms trading in illiquid instruments. While it is possible for those firms to carry out part of the test based on data at their disposal, the complete determination of the SI activity necessitates an assessment of the investment firms' OTCtrading activity in a particular instrument in relation to overall trading in the Union. In order to ensure a consistent assessment and to ensure that all investment firms are treated in the same manner, for all instruments, irrespective of their liquidity status, the assessment should therefore be performed by 1 September 2018 for equity, equity like and bond instruments. The assessment does not need to be performed for ETCs, ETNs, SFPs, securitised derivatives, emission allowances and derivatives until at the latest 2020.
Similarly, although Commission Delegated Regulation (EU) No 2017/565 allows shorter lookback periods for newly issued instruments compared to the six months described above, ESMA considers that it is important to ensure a level playing field between all instruments and, therefore, suggests to apply the schedule proposed above also to newly issued instruments i.e. first publication by ESMA of the necessary EU-wide data by 1 August 2018 for equity, equity like and bond instruments and earliest deadline to comply, where necessary, with the SI regime set on 1 September 2018 for equity, equity like and bond instruments.
It is nevertheless important to stress that investment firms should be able to opt-in to the systematic internaliser regime for all financial instruments from 3 January 2018, for example, as a means to comply with the trading obligation for shares. For equity, equity-like and bond instruments for which the overall trading in the Union will not be published, the opt-in regime will remain a possibility for investment firms to become an SI. The same is true as far as ETCs, ETNs, SFPs, securitised derivatives, emission allowances and derivatives are concerned.
For subsequent assessments, ESMA intends to publish the necessary information within a month after the end of each assessment period as defined under Article 17 of the Commission Delegated Regulation (EU) No 2017/565 - i.e. by the first calendar day of months of February, May, August and November every year. After the first assessment, investment firms are expected to perform the calculations and comply with the systematic internaliser regime (including notification to their NCA) no later than two weeks after the publication by ESMA i.e. by the fifteenth calendar day of the months of February, May, August and November every year.
Question 2 [Last update: 31/01/2017]
Do the calculations to identify if an investment firm is systematic internaliser have to be carried out at legal entity level or a group level? How are branches of investment firms being treated?
Answer 2
The definition of systematic internaliser under Article 4(1)(20) of MiFID II refers to 'investment firms' established in the EU and, therefore, the calculations should be carried out at legal entity level. For EU investment firms operating branches in the Union, the activity of those branches would need to be consolidated for the purpose of the systematic internaliser calculations.
Question 3 [Last update: 31/01/2017]
a) Should investment firms, when determining if they are a systematic internaliser, include (i) transactions that are not contributing to the price formation process and/or are not reportable and (ii) primary market transactions?
b) Should investment firms, when determining if they are a systematic internaliser, include trades executed on own account on a trading venue but following an order from the client?
c) Are off order book trades that are reported to a regulated market, MTF or OTF under its rules excluded from the quantitative thresholds for determining when an investment firm is a systematic internaliser?
Answer 3
a) Article 13 of RTS 1 and Article 12 of RTS 2 exempt investment firms from reporting certain types of transactions for the purposes of post-trade transparency. ESMA is of the view that those types of transactions should not be part of the calculations for the purposes of the definition of the systematic internaliser regime, both for the numerator and the denominator of the quantitative thresholds specified in the Commission delegated regulation (EU) No 2017/565. The types of transactions included in Articles 13 of RTS 1 and 12 of RTS 2 are technical and cannot be characterised as transactions where an investment firm is executing a client order by dealing on own account. More importantly, the lack of a reporting obligation for those types of transactions would be a considerable challenge for competent authorities to supervise and for investment firms to comply with the systematic internaliser regime.
Primary market transactions in securities as well as creation and redemption of ETFs' units should not be included in the calculations.
b) Article 12(6) of RTS 1 and in Article 7(7) of RTS 2 clarify that two matching trades entered at the same time and for the same price with a single party interposed are considered as a single transaction. An investment firm may, on the back of a client order, execute a trade on own account on a trading venue and back it immediately to the original client. While the trade can be broken down into two transactions - the first transaction executed on own account by the investment firm on the trading venue and the second transaction executed between the investment firm and the client - such transactions should be considered economically as one trade. ESMA is of the view that where the market leg is executed on a trading venue and immediately backed to the client at the same price, the investment firm is not deemed to execute a client trade outside a regulated market, an MTF or an OTF. Therefore, only one trade should be counted for the denominator for determining the systematic internaliser activity (total trading in the EU), and no trade should be included in the numerator when determining whether an investment firms is a systematic internaliser.
However, in case the market leg transaction is not immediately backed to the client or in case the price is not the same, the trades should be counted as two for the denominator and the trade with the client should be counted for the numerator.
c) An investment firm dealing on a trading venue is not deemed to act as a systematic internaliser. A trading venue is a multilateral system that operates in accordance with the