The EACB welcomes the opportunity to respond to the ESMA Consultation Paper on draft RTS on package orders for which there is a liquid market. The EACB has followed with great interest the MiFID review and has engaged with the EU-legislators throughout the legislative procedure. In the context of the current consultation, the EACB has focused on the specific topic of the Systematic Internaliser (SI) Regime as this issue has always been very important for its members. The EACB has closely followed the discussions regarding the implementation of the SI regime as we are concerned that – if not designed properly- it could:
• unintentionally create liquidity problems in smaller regional markets which are characterised by
(1) a very limited number of liquidity providers, (2) a limited number of end-clients, (3) small issue sizes and (4) infrequent trading.
• harm smaller banks which use bonds as main funding instruments in order to sustain and finance the local communities and to grant credit to SMEs and households.
At this juncture, and although the SI obligations on package orders are not part of this draft RTS, ESMA considered it important to clarify the circumstances when SIs are required to apply their obligation at an instrument level, and when at the level of the package order. ESMA’s preliminary view is that where an investment firm is an SI in at least one component instrument of a package order and is prompted for a quote in this package order, Article 18(11) of MiFIR applies and SIs are required to comply with their obligations at the level of the package order. Where the package order has a liquid market as a whole, the obligations for liquid instruments under Article 18(1) of MiFIR apply. Where the package order does not have a liquid market as a whole, the obligations for illiquid instruments under Article 18(2) of MiFIR apply. Article 18(10) of MiFIR states that SIs are not subject to obligations if they deal above the Size Specific to the Instrument (SSTI) size. In the package order context and read in conjunction with Article 9(1)(e)(iii) of MiFIR ESMA understands that SIs are also exempted from obligations under Article 18(1) and (2) of MiFIR if all components of package are above SSTI. The EACB has certain concerns with this approach which are explained below under Question 1.
However, the fact that the EACB response is at this point in time limited to Q1does not mean that the rest of the questions not responded to are not important to the EACB and its members nor should it be regard- ed as an unconditional consent on ESMA’s approach on such topics.
3 January 2017
ESMA Consultation Paper on draft RTS on package orders for which there is a liquid market - EACB response
EACB