Einde inhoudsopgave
EU Equity pre- and post-trade transparency regulation (LBF vol. 21) 2021/5.II.2.3.2.2
5.II.2.3.2.2 Level 2 text: type and minimum size of orders
mr. J.E.C. Gulyás, datum 01-02-2021
- Datum
01-02-2021
- Auteur
mr. J.E.C. Gulyás
- JCDI
JCDI:ADS267056:1
- Vakgebied(en)
Financieel recht / Bank- en effectenrecht
Financieel recht / Europees financieel recht
Financiële dienstverlening / Financieel toezicht
Voetnoten
Voetnoten
ESMA considers a ‘stop order’ to be an order to buy or sell an instrument that remains inactive (i.e. invisible and not executable) and that is activated when the market surpasses a triggering reference. At that moment, the order is disclosed to the market (depending on whether it’s a market or limit order) and interacts with the order book according to the rules applicable to all other orders (ESMA, Discussion Paper: MiFID II/MiFIR, 2014(ESMA/2014/548), p. 74).
ESMA considers an ‘iceberg order’ to be an order where only part of the volume is visible to others and the remainders remain hidden. Once the visible part if executed, the systems shows another part of the order and so on until the order is fully completed (ESMA, Discussion Paper: MiFID II/MiFIR, 22 May 2014(ESMA/2014/548), p. 74).
ESMA, Final Report: MiFID II/MiFIR, 28 September 2015(ESMA/2015/1464), p. 24.
ESMA, Final Report: MiFID II/MiFIR, 28 September 2015(ESMA/2015/1464), p. 24.
ESMA gave as examples a stop limit order or a stop market order. ESMA noted that whenever the stop price is reached a limit order or market order is sent to the order book. ESMA noted that therefore these orders do not cause a lack of transparency in the order book, but are rather a simple yet efficient tool to manage order execution strategies (ESMA, Discussion Paper: MiFID II/MiFIR, 22 May 2014(ESMA/2014/548), p. 74).
ESMA, Final Report: MiFID II/MiFIR, 28 September 2015(ESMA/2015/1464), p. 24.
In drafting the Level 2 rules, ESMA noted that in terms of types of orders there were two main groups of orders held in order management facilities, that is – (1) ‘stop orders’1 and (2) ‘reserve or iceberg orders’.2 To start, ESMA did not want to restrict order management facilities to stop orders and reserve or iceberg orders.3 Second, ESMA proposed a different approach for determining the minimum size for the two main groups of stop and iceberg orders.
ESMA stated that for all orders held in an order management facility, including stop orders, the minimum size needed to be, at the point of entry of the order, the minimum tradable quantity established by the trading venue.4 ESMA noted that these efficient tools to manage order execution strategies needed to be available to all investors from the smallest size possible size of an order (otherwise smaller investors could be harmed). ESMA indicated that there was no lack of pre-trade transparency, since the orders would be made transparent once the triggering reference was met.5 The statement of ESMA reinforces the statement made above that the order management facility supports semi-dark pools (also ‘grey pools’), rather than fully dark pools (see paragraph above). ESMA proposed a different approach for reserve orders (also ‘iceberg orders’). For reserve orders the minimum size was suggested to be, at the point of entry and following amendment, not smaller than EUR 10.000.6 The minimum size was to balance between the possibility of efficiently managing larger orders by reducing market impact (iceberg order) versus the merits of pre-trade transparency in making the entire public all at once.
The position of ESMA is evident in the final MiFID II text. MiFID II does not provide an exhaustive list of order types available for the order management facility waiver. In addition, the minimum sizes are set at EUR 10.000 for reserve orders, respectively the minimum tradable quantity for all other types of orders (including stop orders).