On August 28, the European Commission (EC) published the text of an EC Delegated Regulation (SI Delegated Regulation), amending Delegated Regulation (EU) 2017/565 with respect to the specification of the definition of systematic internalizers (SI) for the purposes of the revised Markets in Financial Instruments Directive (MiFID II).

Delegated Regulation (EU) 2017/565 supplements MiFID II with respect to organizational requirements and operating conditions for investment firms and defined terms. Articles 12 to 16 expand on the definition of an SI as set out in Article 4(1)(20) of MiFID II.

The EC consulted on the SI Delegated Regulation in June 2017 because of perceived ambiguities about the meaning of “trading on own account when executing client orders” (for further information please see the June 23, 2017 Corporate Financial Weekly Digest). The EC stated in the SI Delegated Regulation that, during the consultation, concerns were also raised about prudential risk management achieved by means of intragroup transactions. The EC goes on to state that these concerns have been addressed by introducing a new recital and amendment to clarify the scope of matching arrangements that are considered dealing on own account.

The EC adopted the SI Delegated Regulation on August 28. If neither the Council of the European Union nor the European Parliament object to the SI Delegated Regulation, it will be published in the Official Journal of the European Union (OJ). It will become effective on the day after its publication in the OJ and will apply beginning January 3, 2018.

The SI Delegated Regulation is available here.