MiFID2: ESMA writes to Commission on systematic internalisers operating broker crossing networks

Several market participants have made ESMA aware of their observations that certain investment firms, that currently operate broker-crossing networks, might be seeking to circumvent the MiFID2 requirements by setting up networks of interconnected SIs and other liquidity providers. Such arrangements would allow SIs to cross third party buying and selling interests via matched principal trading, or other types of back-to-back transactions. ESMA has encouraged the Commission to look into the matter to determine whether it should use any of its regulatory tools to address this issue, such as the power to adopt delegated acts further specifying the definitions in the Level 1 Directive.

ESMA intends to closely monitor developments and may, in future, clarify the scope of SIs' permitted activities and the characteristics of multilateral systems in its questions and answers (Q&A) document.