[ESMA 70-872942901-35 MiFIR transparency Q&A, Q&A 7.4]

(a) The calculation should be performed at the most granular class level as identified in RTS 2. Where an investment firm meets the thresholds for such a class, it should be considered as a systematic internaliser for all derivatives within that most granular class. In particular, both the numerator and the denominator should refer to the same class of derivatives.

With respect to equity derivatives, the sub-classes as defined in Table 6.2 of Annex III of RTS 2 for LIS and SSTI should be used. 

(b) For SFPs, calculations should be performed at ISIN level and where, for a specific ISIN, an investment firm is above the thresholds prescribed, it should be considered a systematic internaliser for all SFPs issued by the same entity or by any entity within the same group.

(c) A class of bonds issued by the same entity, or by any entity within the same group is a subset of a class of bonds in table 2.2 of Annex III of RTS 2 (sovereign bond, other public bond, convertible bond, covered bond, corporate bond, other bond). Hence, where an investment firm passes the relevant thresholds in a bond it will be considered to be a systematic internaliser in all bonds belonging to the same class of bonds according to table 2.2. of Annex III of RTS 2 issued by the same entity, or by any entity within the same group.

It is therefore possible to distinguish between, for instance, corporate bonds and convertible bonds as different classes of bonds, but the debt seniority of a bond does not constitute a different class.

(d) The calculation should be performed at the level of the emission allowance type. In other words, both the numerator and the denominator shall refer to the same sub-asset class level as identified in RTS 2.

(e) A derivative contract (ISIN) might change sub-class over its life. This occurs whenever the segmentation criteria include one or more of the following (i) the time-to-maturity bucket (ii) being on-the-run or off-the-run. Therefore, it is necessary to clarify when performing the SI test to which sub-class the number of transactions and the nominal amount traded of an ISIN should be allocated where the contract is changing sub-class during the observation period.

More specifically, investment firms shall perform the SI test for all financial instruments (ISINs) traded over the 6-month observation period and which have not expired on the first day of February, May, August, December which are the months by which the publication of the relevant data of the denominator are published by ESMA.

After having identified the instruments for which the test shall be performed, investment firsts can either follow the two-step approach presented below or perform a one-step approach as per step 2.

STEP 1 – perform the SI-test on basis of the sub-class to which the ISIN belongs to on the first day of February, May, August, December and allocate all the transactions executed and the related nominal amount traded of the ISIN to that sub-class. If the SI test is not passed, the investment firm is not required to perform step 2.

STEP 2 – if the SI test under step 1 is passed, the investment firm should re-perform (for all the ISINs allocated to sub-classes that passed step 1) the test by allocating the transactions executed and the nominal amount traded of an ISIN to the relevant sub-class to which the contract belongs to on a specific day over the observation period. This implies that transactions in the same ISIN, which changes sub-class during the observation period will be partially allocated to the initial sub-class and partially to the new sub-class once the change has occurred. For example, if over the observation period 1 October Year (t) and 31 March Year (t+1) a bond future contract on a 10 year bond XYZ and 9 months maturity which goes from time to maturity bucket 3 (6 months – 1 year) to time to maturity bucket 2 (3 months – 6 months) on 12 December Year (t), all transactions and nominal amount traded recorded between 1 October and 11 December Year (t) will be counted in the sub-class of bond futures with the same underlying bond XYZ with a long term and with time to maturity in bucket 3. All transactions and nominal amount traded recorded between 12 December Year (t) and 31 March Year (t+1) will be counted in the sub-class of bond futures with the same underlying bond XYZ with a long term and with time to maturity in bucket 2.