EUROPEAN UNION: ESMA Clarifies Transparency and Position Limit Regimes for Instruments Traded on Non-EU Trading Venues

Wednesday May 31 2017

On 31^st May 2017, the European Securities and Markets Authority (ESMA) issued two opinions regarding the implementation of the Market in Financial Instruments Directive (MiFID II) and Regulation (MiFIR).

ESMA’s opinions provide greater understanding with regards to:

• under which circumstances transactions executed on non-EU trading venues will be subject to the MiFIR post-trade transparency rules; and
• whether positions held in contracts traded on non-EU venues will be subject to the MiFID II position limit regime.

The opinions clarify that, where non-EU trading venues meet a set of objective criteria, EU market participants concluding transactions on these trading venues:

• do not have to make those transactions public in the EU under MiFIR; and
• commodity derivative contracts are not considered as economically equivalent over-the-counter (EEOTC) contracts for the purpose of the position limit and position reporting regimes under MiFID II.

ESMA has devised the procedures described in the opinions to provide legal certainty to market participants and to find a pragmatic way forward in two highly technical areas of the MiFID II framework which should contribute to applying MiFID II in a convergent fashion as of 3 January 2018. Therefore, ESMA, encourages market participants who are active in non-EU venues and are unsure about their application of the transparency and position limit regimes to make their national competent authority aware as soon as possible.

ESMA’s opinions are accompanied by Questions and Answers (Q&As) that provide further guidance on the process that ESMA asks market participants to follow.

The updated Q&As include new answers regarding:

• algorithmic trading;
• the extension of a pre-existing MiFID I waiver to equity-like instruments;
• the SI regime;
• non-equity instruments and data reporting services providers; and
• commodity derivatives.

Click on the link above for further details.