Off-order book trades reported to a regulated market should be exempt from the thresholds for determining whether a firm is a systematic internaliser, according to the European Securities and Market Authority’s (ESMA) latest Q&A.
Those operating via a venue that is a multilateral system or organised trading facility that operates within the requirements of MiFID II, should not count trades when calculating quantitative thresholds.
“An investment firm dealing on a trading venue is not deemed to act as a systematic internaliser,” ESMA said.
Firms are expected to carry out systematic internaliser assessments by 1 September 2018 - although can opt in to the SI regime beforehand – following its publication of EU wide necessary data by 1 August 2018.
ESMA also clarified that trades executed on own account on a trading venues but following an order from a client must count as one trade under the regime.
“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,” ESMA said.
Transactions that are not contributing to the price formation process are also exempt from the assessments, due to the lack of reporting obligations leading to challenges for authorities to supervise firms complying with the systematic internaliser regime.
The TRADE is hosting its latest MiFID II pop-up event in London on 27 February. To register to attend, please click here.