MiFID - Secondary Markets

The European Securities and Markets Authority (ESMA) has today provided access to the template which will be used to publish the first set of figures necessary for investment firms to assess whether they are systematic internalisers in specific financial instruments on August 1.

ESMA had received a number of requests to make this template available in advance of 1 August so stakeholders have more time to adapt to the way ESMA will provide the systematic internaliser information. Publishing this template should therefore facilitate a seamless implementation of the systematic internaliser regime.

The European Securities and Markets Authority (ESMA) today launches a process to renew the composition of the Consultative Working Group (CWG) of the ESMA Secondary Markets Standing Committee (SMSC). ESMA is calling for expressions of interest from stakeholders to become a member of the CWG by 28 August 2018. 

The CWG is mainly expected to advise and assist the SMSC on technical standards to be submitted to the European Commission; guidelines, Q&As and other relevant guidance under ESMA’s supervisory convergence mandate in relation to relevant legislative provisions within the area of competence of the SMSC; any issues in the context of the implementation and application of secondary markets relevant legislation; and assessing the potential impact of any measures contemplated by the SMSC.

The SMSC itself undertakes ESMA’s work relating to the structure, transparency and efficiency of secondary markets for financial instruments, including trading venues and OTC markets. In terms of policy, among others it has the responsibility for elaborating technical standards, guidelines, opinions, Q&As and other guidance as well as providing advice to the European Commission relating to pre-trade and post-trade transparency requirements for equity, equity-like and non-equity instruments, provisions governing access to CCPs, trading venues and benchmarks, market structures and microstructures, organisational requirements for investment firms, requirements applying to data services providers and the trading obligations for derivatives and shares. It also provides a forum for national competent authorities to exchange experiences on MiFID II/MiFIR implementation and related supervisory issues. 

Members of the CWG are selected for a term of two years and are renewable. Interested experts are asked to send their application to ESMA by 28 August 2018. 


Amendment to Commission Delegated Regulation (EU) 2017/588 (RTS 11)

Responding to this paper

ESMA invites comments on all matters in this paper and in particular on the specific questions summarised in Annex 1. Comments are most helpful if they:

·         respond to the question stated;

·         contain a clear rationale; and

·         describe any alternatives ESMA should consider.

ESMA will consider all comments received by 7 September 2018.

The European Securities and Markets Authority (ESMA) has published a Consultation Paper (CP) proposing amendments to the tick size regime (Commission Delegated Regulation (EU) 2017/588 (RTS 11)). The MiFID II tick size regime aims at creating a level playing field between the different trading venues in the EU by regulating the minimum price increment that can be used by those trading venues. The CP aims to address issues, in a timely manner, that have arisen with respect to financial instruments where only a marginal proportion of trading is executed on EU trading venues and the main pool of liquidity is located outside the EU (third country instruments).

The minimum tick size applicable to shares and depositary receipts, under RTS 11, is calibrated to the average daily number of transactions (ADNT) on the most liquid market in the EU. While this metric provides a good and simple liquidity indicator for the vast majority of equity instruments, it may not be well suited to third country instruments where the most liquid trading venue is located outside the EU. In these cases, the mandatory tick size may be calculated based on underestimated liquidity and EU trading venues might be subject to minimum tick sizes that are larger than those applicable on non-EU venues.

In this context, ESMA considers it necessary to introduce amendments to RTS 11 to ensure that the tick sizes applicable to third country instruments are adequate and appropriately calibrated. ESMA proposes allowing the relevant NCA for a specific share, with its main pool of liquidity outside the EU, to adjust the average daily number of transactions in order to take into account more comprehensive trading data and ensure that trading in the share is not unduly constrained and does not create disorderly trading conditions. Furthermore, ESMA also proposes a set of conditions governing how NCAs make any adjustments based on numerical evidence of the location of the most liquid trading venue and a threshold for the minimum amount of daily transactions.

Steven Maijoor, Chair, said:

“These specific cases where EU trading venues might be subject to minimum tick sizes larger than those applicable on non-EU venues may have the unintended result of putting EU trading venues at a competitive disadvantage.

“This might result in scarcer and shallower liquidity being available on EU trading venues which can be detrimental to those trading on those venues. This timely consultation looks to address these cases and contributes to orderly financial markets.”

Next steps

Stakeholders are invited to provide feedback on this proposal until 7 September 2018. ESMA, on the basis of the responses received to this CP, will finalise its proposed amendment to RTS 11 and submit a final report to the European Commission for endorsement.