MiFIR: ESMA consults on trading obligation for derivatives

The European Securities and Markets Authority (ESMA) has published a discussion paper on the trading obligation under the Markets in Financial Instruments Regulation (MiFIR). The paper seeks views on ESMA's first proposals on the implementation of the trading obligation for derivatives as set out in Articles 28 and 32 of MiFIR and on ESMA's preliminary analysis of some classes of derivatives that could become subject to the trading obligation.

The trading obligation under MiFIR is linked to the clearing obligation under the European Market Infrastructure Regulation (EMIR). Once a class of derivatives needs to be centrally cleared under EMIR, ESMA must determine whether these derivatives should be traded on venue i.e., a regulated market (RM), multilateral trading facility (MTF), organised trading facility (OTF) or an equivalent third-country trading venue. MiFIR sets out two possible tests to determine the trading obligation: the venue test and the liquidity test.

The discussion paper sets out options on how to determine the trading obligation by applying both tests, including an initial liquidity assessment on the basis of trading data for the six months to end-2015.

Comments to the consultation close on 21 November 2016. ESMA will analyse the feedback received to this consultation and aims to publish a consultation paper in the first quarter of 2017. If needed, a draft technical standard is scheduled to be submitted to the EU Commission in the summer of 2017.