Trading
MiFID II and MiFIR ensure fairer, safer and more efficient markets and facilitate greater transparency for all participants.
MiFID II and MiFIR have been complemented by numerous Delegated Acts, Regulatory Technical Standards (RTS), Implementing Technical Standards (ITS), as well as Guidelines, Opinions, Q&As, and a Manual on post-trade transparency.
▸ Interactive Single Rulebook for MIFID II and MIFIR
The rules contained in the MIFID II / MIFIR package extend to bond and derivative markets the principles of organisation and transparency prevailing for equities under MIFID I. They also reduce systemic risk and guarantee financial market stability, in particular by reducing over the counter (OTC) trading and moving it to regulated one, i.e. trading on Regulated Markets, MTFs, OTFs and Systematic Internalisers.
Fairer, safer and more efficient markets
- fair competition between the different trading platforms, in particular by harmonising the organisational requirements among them and by requiring non-discriminatory access to trading venues, CCPs and benchmarks;
- financial stability, thanks to imposing a strict set of organisational requirements on investment firms and trading venues, and in particular introducing the rules governing high-frequency-trading;
- fair access to market data, thanks to rules regarding reasonable commercial basis of the market data provision and free access to it on delayed basis.
Greater transparency
- a liquidity assessment and thresholds for pre-trade and post-trade transparency regimes for wide range of equity and non-equity financial instruments;
- a trading obligation for shares (STO) and certain derivatives (DTO) to be traded only on regulated platforms and, in the case of shares, systematic internalisers, instead of OTC;
- a volume cap mechanism (VCM) to limit dark trading and reshape the use of waivers for shares and equity-like instruments.
Commodity derivatives
MiFID II/MiFIR introduce new regulations for commodity derivatives to ensure that participants in commodity derivatives markets are subject to appropriate regulation and supervision and to improve the regulation and functioning of commodity derivatives markets.
MiFID II and MiFIR have been complemented by Delegated Acts, Regulatory Technical Standards (RTS), and Implementing Technical Standards (ITS). Where necessary, ESMA adopts Level 3 measures (Q&As, opinions, etc.) to provide guidance to the different stakeholders and ensure consistent implementation across the Union (Interactive Single Rulebook for MIFID II and MIFIR).
Position limits and position management controls
MiFID II establishes a position limit regime for agricultural commodity derivative contracts and critical or significant commodity derivative contracts traded on trading venues and economically equivalent over-the-counter (EEOTC) contracts to prevent market abuse and support orderly pricing and settlement conditions. Critical or significant commodity derivatives are defined in Article 57(1) of MiFID II as commodity derivatives with a net open interest above 300,000 lots over a one-year period. Article 57(3) of MiFID II requires ESMA to publish the list of critical or significant contracts.
The methodology followed by National Competent Authorities (NCAs) when setting position limits is further specified in the Commission Delegated Regulation (RTS 21a). Article 57(10) of MiFID II requires ESMA to publish and maintain a database with summaries of position limits and position management controls on its website. Critical or significant commodity derivatives and liquid agricultural commodity derivatives receive bespoke position limits set by the relevant NCAs. Illiquid agricultural commodity derivatives receive bespoke position limits in accordance with RTS 21a. Together with the list of critical or significant commodity derivatives, ESMA provides information on the position limits established per significant commodity derivative and liquid agricultural commodity derivative contracts as well as links to the opinions issued by ESMA in accordance with article 57(5) of MiFID II.
Position reporting
MiFID II also establishes position reporting obligations to enable monitoring of compliance with the position limit regime and mandates the publication of weekly reports detailing aggregate positions held by different categories of market participants. The format and timing of those reports are specified in two Commission Implementing Regulations (ITS 4 and ITS 5). ESMA is required to centrally publish the weekly reports on its webpage.
- Weekly reports of aggregate position held by different categories of market participants
- Reporting instructions and XML Schema for weekly position reports (see also the news item)
Transparency calculations
MiFID II/MiFIR introduces transparency requirements for equities, bonds, structured finance products, emission allowances and derivatives, empowering competent authorities (CAs) to waive the obligation for market operators and investment firms operating a trading venue, to make public pre-trade information. Furthermore, transactions may also benefit from deferred publication. In addition, for equity instruments the Regulation introduces a tick size regime.
These calculations contain also data related to European Economic Area (EEA) / European Free Trade Association (EFTA) States.
Calendar MiFID II/ MiFIR Transparency publications
Scheduled publication dates for data relevant for MIFID II / MiFIR transparency
| Date | Publication | Instrument scope | Publication location |
|---|---|---|---|
| 1 March | Annual transparency calculations | Equity and equity-like instruments | FITRS |
Background
- Annual transparency calculations for equity and equity-like instruments (“Annual transparency calculations for equity”) using the data reported in the previous calendar year, include:
- the liquidity assessment as per Articles 1 to 5 of CDR 2017/567;
- the determination of the most relevant market in terms of liquidity (MRM) as per Article 4 of CDR 2017/587 (RTS 1);
- the determination of the average daily turnover (ADT) relevant for the determination of the pre-trade and post-trade large in scale (LIS) thresholds;
- the determination of the average value of the transactions (AVT) and the related standard market size (SMS); and,
- the determination of the average daily number of transactions on the most relevant market in terms of liquidity (ADNT) relevant for the determination of the tick-size regime.
