EU Equity pre- and post-trade transparency regulation (LBF vol. 21) 2021/4.III.1.1:4.III.1.1 General

EU Equity pre- and post-trade transparency regulation (LBF vol. 21) 2021/4.III.1.1

4.III.1.1 General

Deze functie is alleen te gebruiken als je bent ingelogd.Deze functie is alleen te gebruiken als je bent ingelogd.Deze functie is alleen te gebruiken als je bent ingelogd.

The MiFID I definition of RMs and MTFs has been examined in chapter 1. The reason for examining the MiFID I SI-definition here, instead of in chapter 1, is because the SI-definition was inherently linked to the MiFID I pre-trade transparency requirements. Whereas RMs and MTFs were subject to a broad set of rules, including pre-trade transparency rules, SIs were predominantly characterized by the application of MiFID I pre-trade transparency rules. For this reason, the MiFID I definition of SIs is studied in this section.

MiFID I defined an SI as ‘an investment firm which, on an organised, frequent and systematic basis, deals on own account by executing client orders outside an RM or an MTF’.1 The key words in the definition, that is – (1) organised; (2) frequent; (3) and systematic, needed to be fulfilled collectively in order for an investment firm to be an SI.2 The qualification only applied in relation to the share admitted to trading on an RM in question for which the investment firm engaged in systematic internalisation.3

The details of the SI-definition were set out in the directly applicable MiFID I Implementing Regulation. In brief, systematic internalisation was an activity that:

a)

had a material commercial role for the firm4 and was carried on in accordance with non-discretionary rules and procedures;

b)

was carried on by personnel, or by means of an automated technical system, assigned to that purpose, regardless of whether those personnel or that system were used exclusively for that purpose; and

c)

was available to clients on a regular or continuous basis.5

Where an investment firm met the criteria of point (a-c) on an organised, frequent and systematic basis, the investment firm was treated as a SI.6 An investment firm ceased to be a SI where it: (1) ceased to carry on this activity; and (2) as long as it had announced its intention in advance.7 For the announcement the firm needed to use the same publication channels that it used to publish its quotes or, where that was not possible, using a channel equally accessible.8

MiFID I also covered an exception to the definition. The activity of dealing on own account by executing client orders (i.e. internalisation) was not treated as systematic internalisation where the following two conditions applied: (i) the activity was performed on an ad hoc and irregular basis, and was carried out with wholesale counterparties as part of business relationships which were characterized by dealings above standard market size;9 and (ii) the transactions were carried out outside the systems habitually used by the firm for its business as a SI.10 The two conditions had the same characteristics as what MiFID I referred to as ‘transactions carried out on an OTC basis’.11

MiFID I required NCAs to maintain and publish a list of all SIs that it had authorised as investment firms. The list was made available to and published by CESR.12

Deze functie is alleen te gebruiken als je bent ingelogd.