EUROPEAN UNION: ESMA Consults on RTS on the Treatment of Package Orders under MiFID II

Thursday November 10 2016

The European Securities and Markets Authority (ESMA) has opened a public consultation on draft regulatory technical standards (RTS) regarding the treatment of package orders under the amended Markets in Financial Instruments Directive (MiFID II) and Regulation (MiFIR).

Package transactions are interlinked financial transactions comprising various instruments which firms execute jointly in order to reduce transaction costs and for risk management purposes. MiFIR’s pre-trade transparency regime requires the disclosure of trading interests in all non-equity instruments. However, national competent authorities will be able to waive this requirement if certain conditions are met. Unless there is a liquid market for the package order as a whole, the amended MiFID II also allows the authority to waive the pre-trade transparency obligation.

ESMA’s draft RTS establish a methodology for determining those package orders for which there is a liquid market in the European Union and which consequently may not be waived from pre-trade transparency requirements. The methodology ESMA is proposing is based on qualitative criteria which allows ESMA to take the characteristics of packages into account which are standardised and frequently traded.

Asset-class specific criteria have been developed for the following asset classes:

• interest rate derivatives;
• equity derivatives;
• credit derivatives; and
• commodity derivatives.

Packages in asset classes for which no asset-class specific criteria exist are considered not to have a liquid market as a whole.

ESMA is seeking stakeholders’ input to its draft RTS by 3 January 2017 and will use the feedback received to finalise the standards by February 2017. The MiFID II regime will enter into force on 3 January 2018.

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