On November 14–15, the European Securities and Markets Authority (ESMA) updated several question and answer documents (Q&As) relating to the revised Markets in Financial Instruments Directive (MiFID II) and the Markets in Financial Instruments Regulation (MiFIR).

The updated Q&As cover the following topics:

  • Market Structure Issues:This Q&A has been updated for questions relating to the tick size regime, direct electronic access (DEA) and multilateral systems.
    • Notably, the Q&A has been updated to clarify ESMA’s expectations relating to sub-delegation and authorization requirements for DEA. ESMA makes the distinction between “tier 1 DEA clients” and “tier 2 DEA clients,” where the former directly interacts with the DEA provider to obtain the provider’s trading code, while the latter does not possess the trading code. ESMA states that such tier 2 DEA clients would not have DEA for the purposes of MiFID II. ESMA also states that trading venues should only permit members or participants to provide DEA where they are investment firms (authorized under MiFID II) or credit institutions (i.e., EU authorized banks).
  • Transparency:The updated Q&A contains questions and answers relating to pre- and post-trade transparency for equity and non-equity instruments, systematic internalizers, data reporting service providers, and third-country issues.
    • ESMA has clarified how chains of transmission of orders should be treated when it comes to the trading obligation for shares under Article 23(1) of MiFIR. Briefly, it is for each EU investment firm within that chain to ensure that ultimate execution of the order complies with the share-trading obligation.
    • The third-country issues section sets out a chart showing how varying scenarios involving third-country firms should be treated. The chart clarifies, for instance, when non-EU branches of EU investment firms should be treated in the same way as the EU investment firm itself.
  • MiFIR Data Reporting:This Q&A provides clarification regarding transaction reporting for primary issuances, corporate events, portfolio management and swaps-related to indices.
  • Commodity Derivatives:This update includes new answers regarding position limits, ancillary activities and position reporting.