ESMA Q&A on Trading Obligation for Shares Under MiFID II


The European Securities and Markets Authority (“ESMA“) published a press release on November 13, 2017 clarifying the application of the trading obligation for shares to trade certain instruments on-venue under the MiFID II Directive (2014/65/EU).

The press release contains a Q&A about the scope of the trading obligation where there is a chain of transmission of orders. ESMA explains that Article 23(1) of the Markets in Financial Instruments Regulation (Regulation 600/2014) (“MiFIR“) determines the scope of the trading obligation for shares admitted to trading on a regulated market or traded on a trading venue by requiring investment firms to ensure that trades they undertake in shares take place on a regulated market systematic internalizer, multilateral trading facility (MTF), or equivalent third-country venue.

Where there is a chain of transmission of orders concerning those shares, all EU investment firms that are part of the chain should ensure that the ultimate execution of the orders complies with the requirements under Article 23(1) of MiFIR.

The European Commission is preparing equivalence decisions for non-EU jurisdictions whose shares are traded systematically and frequently in the EU. However, the absence of an equivalence decision relating to a particular venue indicates that the Commission currently has no evidence that the EU trading in shares admitted to trading in that third country’s regulated markets can be considered as systematic, regular and frequent.