5.V.1.2.5 The term ‘undertakes’

MiFID II requires each investment firm to ensure the trades it ‘undertakes’ in shares admitted to trading on an RM or traded on a trading venue (hereafter: ‘shares’) to take place on regulated venues.1 ESMA provided guidance when an investment firm ‘undertakes’ a trade in shares. The guidance of ESMA focuses on the situation where there is a so-called ‘chain of order transmissions’. A ‘chain of order transmissions’ is where an investment firm (or multiple investment firms) transmit(s) orders to another or other investment firm(s) and at the end of the chain an investment firm actually executes the order. ESMA stated that where there is a chain of order transmissions in shares all EU investment firms that are part of the chain (either transmitting or executing the order) need to ensure that the ultimate execution of the orders complies with the trading obligation.2 Phrased differently, ESMA indicates that not only the investment firm that actually executes the order, but also the investment firm that transmits the order, is subject to the MiFID II share trading-obligation.3