On June 20, the European Commission (EC) published a consultation and draft amendment to Delegated Regulation (EU) 2017/565 (Delegated Regulation) supplementing the revised Markets in Financial Instruments Directive (MiFID II). The Delegated Regulation specifies, among other things, additional criteria to be considered in determining whether a firm is a systematic internalizer (SI) for the purposes of the SI definition in Article 4(1)(20) of MiFID II.
The amendment addresses concerns regarding a potential “loophole” in the SI regime, whereby networks of firms may have been able to engage in matched principal trading (for further information, please see the Corporate & Financial Weekly Digest edition of February 17, 2017). MiFID II defines an SI, in part, as a firm that “deals on [its] own account when executing client orders.” The amendment states that an investment firm shall not be considered to be “dealing [its] on own account” for the purposes of the SI definition where it participates in matching arrangements with the objective or consequence of carrying out de facto riskless back-to-back transactions.
The effective date of the Delegated Regulation also has been amended to match that of MiFID II: January 3, 2018. The EC’s consultation on the amendment will close on July 17.
On June 21, implementing technical standards (ITS) relating to commodity position reporting were published in the Official Journal of the European Union. The ITS set out the format of the weekly and daily position reports for commodity derivatives, emission allowances and derivatives thereof under Article 58 of MiFID II. The ITS goes into effect 20 days following its publication, and shall apply from January 3, 2018, when MiFID II comes into force.