The MiFID II Systematic Internaliser (SI) regime comes into force on the 1st September and ESMA has now released the total volume of transactions executed across the European Union (“EU”) for specific equity (and equity-like) and non-equity (bond) instruments for the 6 month period between January and June.
An SI is an investment firm which, on an organised, frequent and systematic, and substantial basis, deals on its own account (principal trading) by executing client orders outside trading venues.
ESMA has published results for instruments where trading venues submitted data for at least 95% of all trading days over the 6-month period, and covers over 9000 equities and almost 74,000 bonds. You can read ESMAs 1st August publication here and access the data here.
Investment firms now have less than a month to assess their own trading volumes against this data and calculate their SI status per instrument. For each specific instrument, investment firms are required to compare their own account trading against the total volume and number of transactions executed in the EU. If the firm determines that it exceeds the relative thresholds for these instruments, it will be deemed an SI and will have to fulfil the SI-specific obligations.
SI obligations include making firm quotes in liquid instruments public (pre-trade transparency) and making public the details of executed trades within either 1 minute for equities (and equity-like) or 15 minutes for non-equities (post-trade transparency). These pre-trade and post-trade transparency obligations for OTC trading is a complete change compared with OTC trading practices today and the practicalities of implementing the SI regime are likely to present a significant challenge for firms that become SIs.