5.II.2.2.6.2 Level 1 text: MiFIR definition of a liquid market

As noted, the Council proposed a framework definition of a ‘liquid market’ in MiFIR (Level 1 text). The proposal of the Council needs be read in conjunction with the introduction of the double volume cap mechanism. The concept of a liquid market would demarcate the application of the double volume cap mechanism to the negotiated trade waiver.1 The Council proposed a framework definition for a ‘liquid market’ in the level 1-text. The Council replicated the four MiFID I criteria for determining a liquid market (i.e. traded daily, free float, average daily number of transactions, and average daily turnover).2 Nonetheless, the Commission made one important change. Under MiFID IIall criteria would be mandatory for the determination of a liquid market. Member State discretions apparent under MiFID I as to the criteria would be removed. The position of the Council is also evident in the final MiFID II-text. Under MiFID II Member States have no flexibility when it comes to the liquid market criteria (although under some conditions Member States can designate liquid markets themselves, see paragraph below).3 In effect, the double volume cap mechanism for negotiated trade waivers in liquid equity instruments needs to apply similarly across the EU.