On May 22, the European Securities and Markets Authority (ESMA) published an opinion regarding the implementation of the revised Markets in Financial Instruments Directive (MiFID II) and the Markets in Financial Instruments Regulation (MiFIR). The opinion clarifies the concept of “traded on a trading venue” (TOTV), which is relevant for a number of provisions under MiFID II and MiFIR, particularly the following:

  • pre-trade and post-trade transparency requirements on market operators and investment firms operating a trading venue as well as for investment firms (including systematic internalizers) operating over-the-counter (OTC);
  • trading obligations for shares and derivatives; and
  • transaction reporting obligations and reference data obligations on investment firms and operators of trading venues.

The opinion clarifies the concept of TOTV for OTC derivatives, and in particular which transactions in derivatives concluded outside of trading venues are subject to the transaction reporting and transparency requirements. ESMA is of the view that only OTC derivatives sharing the same reference data details (other than venue-specific data fields) as the derivatives traded on a trading venue should be considered to be TOTV and, hence, subject to the MiFIR transparency and transaction reporting requirements.

ESMA concludes by acknowledging that what is to be considered the “same” reference data details may need to be revisited, taking into account the evolution of markets after MIFID II and MiFIR go into effect on January 3, 2018. ESMA plans to monitor the application of the concept of TOTV, and, in particular, the ratio of derivatives that are considered TOTV compared to overall OTC derivatives trading.

The opinion is available here.