4.II.2.2.1 General

Another waiver under MiFID I was the negotiated price waiver. The negotiated price waiver was in place for negotiated transactions through the systems of an RM or MTF.1 The negotiated price waiver had several purposes. First of all, the waiver enabled investment firms to achieve best execution for their clients (e.g. when the pre-trade transparent order book could not fill the whole order).2 Secondly, sometimes it was not possible to trade through the pre-trade transparent system due to requirements such as a minimum order size. Negotiated trades could provide a solution to still execute the smaller order.3 Another rationale behind the waiver was that the application of pre-trade transparency to negotiated trades could deceive the price discovery process. Some negotiated trades (not: all) were subject to conditions that did not reflect the current market price, for example, where the price was based on a benchmark.4 Pre-trade data publication about such trades could mislead the price discovery process.5

A transaction needed to comply with MiFID I conditions in order to be considered a ‘negotiated transaction’ (also ‘negotiated trade’). Under MiFID I a negotiated transaction referred to a transaction involving members or participants of an RM or MTF that was: (1) negotiated privately, but (2) executed within the RM or MTF.6 To be eligible as a negotiated transaction the member or participant needed to undertake a pre-set activity as defined by MiFID I. There was only a ‘negotiated trade’ where the member or participant of the RM or MTF undertook one of the following tasks: (a) dealing on own account with another member or participant who acted for the account of the client; (b) dealing with another member or participant, where both were executing orders on own account; (c) acting for the account of both the buyer and seller; (d) acting for the account of the buyer, where another member or participants acts for the account of the seller; or (e) trading for own account against a client order.7

Besides the pre-set activity (elements (a-e)), the MiFID I negotiated price waiver could only be granted where certain conditions were met. Regardless of the size of the order, MiFID I permitted NCAs to grant the negotiated trade waiver if the system satisfied one of the following criteria:

The foregoing requirements illustrate that the MiFID I negotiated price waiver consisted out of two limbs. The first limb was in place for negotiated transactions subject to the current market price. Different pricing conditions applied depending on whether or not the share concerning the negotiated trade was traded continuously or non-continuously. The trading system of the RM or MTF needed to formalize the negotiated transactions in accordance with the pricing conditions set by MiFID I.12 A well-accepted example of this limb included, among other things, the situation where: (a) the trading system formalized negotiated transactions at or within the volume weighted spread, (b) whereby trading participants individually agreed on the price and volume of the trade (c) before transmitting it to the trading platform (RM or MTF). The system of the RM or MTF would ensure that all negotiated transactions were at or within the volume weighted spread on the public order book of the given trading platform.13

The second limb was in place for negotiated transactions not subject to the current market price. In this situation the trading system was not bound by pricing conditions. An example of the second limb included, among other things, so-called Settlement (Pre-agreed) Block Trades. Settlement (Pre-agreed) Block trades were (and still are) negotiated transactions executed in the pre-agreed trading panel of an RM or MTF. The pre-agreed trading panel is used exclusively for conducting pre-agreed trades outside the lit trading segment of the RM or MTF.14 The second limb of the negotiated trade waiver therewith facilitated, among other things, the ability to negotiate a trade within the systems of an RM or MTF for the purposes of efficient settlement.15