OTC trading limitation

MiFID II-MiFIR introduces two specific trading obligations for IFs trading derivatives or shares.

Derivatives transactions which are subject to the clearing obligation in accordance with the EMIR Regulation and for which a sufficient level of liquidity has been determined shall necessarily be concluded on a regulated market, MTF, OTF or trading venue of a third country which has been declared as equivalent. These instruments are currently identified with interest rate derivatives on the main currencies and credit default swaps (CDS) on European indices.

The trading obligation applies if the derivative category or subcategory has been admitted to trading on any of the aforementioned venues and there is sufficient interest on the part of third parties in trading in such derivatives so that they are considered sufficiently liquid to be traded only on the aforementioned centres.

ESMA will publish on its website the derivative instruments subject to the trading obligation, the venues on which they are traded and the date from which the obligation applies.

The trading of shares admitted to trading on a regulated market or traded on a trading venue shall take place on a regulated market, MTF, systematic internaliser or a trading venue in a third country classified as equivalent, unless the transaction is non-systematic, ad-hoc, irregular and infrequent or is carried out between eligible and/or professional counterparties and does not contribute to price formation.