5.VI.2.2.7 Calculating the SI-thresholds

New under MiFID II are quantitative elements of the SI-definition. MiFID II lays down provisions for when an investment firm internalises on (a) frequent and systematic basis and (b) on a substantial basis (i.e. is an SI).1MiFID II covers rules on how these assessments (points a-b) need to be performed.2 Simply put, the quantitative elements of points (a-b) depend on the internalisation activity of the investment firm in relation to: (i) overall investment firm activity and (ii) EU trading activity in the equity instrument.3 What distinguishes the SI calculation methodology from the main MiFID II methodologies (see paragraph above) is that the investment firm (not: the NCA) needs to perform the calculations.4

Investment firms indicated they encountered difficulties in obtaining the data required to perform the internalisation activity in relation to EU trading activity. For this reason, ESMA calculate, on a voluntary and best effort basis, the total volume and number of transactions executed in the EU (EU trading activity).5 The aim of ESMA is to support internalising investment firms in assessing whether or not they are an SI. ESMA publishes the calculation results relevant for the SI assessment on the ESMA website.6

The source of data for the ESMA SI calculations stems from the MiFID II reporting requirements for RMs, MTFs, and APAs (CTPs have until this point in time not been authorised).7 As examined above, MiFID II requires RMs, MTFs, and APAs (and CTPs) to submit ‘all data required’ to the responsible NCA (or ESMA in case of delegation).8