Changes from report parliamentary committee draft to plenary report

Added3. Member States shall require that firms that meet the definition of systematic internalisers notify their competent authority, specifying the financial instruments for which they meet the definition of systematic internaliser. Such notification shall be transmitted to ESMA within one working day.

RemovedRegulation (EU) No 600/2014

AddedESMA shall establish a register of all systematic internalisers in the Union, including the details of systematic internalisers at the level of an individual financial instrument. That list shall be updated by ESMA without delay and within one working day of the competent authority transmitting to it a notification in accordance with the first subparagraph.

RemovedArticle 1 – paragraph 19 – introductory part, Article 32: (19) in Article 32, the following paragraphs 7, 7a, 8 and 9 are added:

Added4. Systematic internalisers shall not be subject to this Article when they deal in sizes that are large in scale compared with the normal market size and as determined in accordance with Article 9(5)(c).

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AddedIn respect of a package order and without prejudice to paragraph 2, the obligations in this Article shall only apply to the package order as a whole and not to any component of the package order separately.

RemovedArticle 1 – paragraph 19, Article 32 – paragraph 7 a (new): 7a. Where ESMA considers that certain events or developments which could adversely affect the liquidity available in the Union in certain or all derivatives that have been declared subject to the trading obligation, ESMA may request that the Commission temporarily suspend the application of the trading obligation laid down in Article 28(1) and (2) of this Regulation for those financial instruments. / The temporary suspension referred to in the first subparagraph shall be valid for an initial period not exceeding three months from the date of publication of the implementing act referred to in paragraph 10. It may be renewed for further periods not exceeding three months at a time if the grounds for the temporary suspension continue to be applicable. / Where the temporary suspension is not renewed after that three-month period, it shall automatically lapse.

Added5. The quotes published pursuant to paragraph 1 shall be made public in a manner which is easily accessible to other market participants on a reasonable commercial basis.

RemovedAdding a stand-alone suspension option for the DTO, i.e. independent of a suspension of the clearing obligation, in order for ESMA to have the necessary tool at hand in scenarios where it may be necessary to suspend the DTO but not the clearing obligation.This mechanism would allow to suspend, independently from the CO, the DTO for certain or all derivatives and based on criteria which would be more flexible than what currently feature in Article 32a. This proposal was strongly supported by market stakeholders.

Added6. The quoted price or prices shall be such as to ensure that the systematic internaliser complies with its obligations under Article 27 of Directive 2014/65/EU, where applicable, and shall reflect prevailing market conditions in relation to prices at which transactions are concluded for the same or similar financial instruments on a trading venue.

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AddedHowever, in justified cases, they may execute orders at a better price provided that the price falls within a public range close to market conditions.’

RemovedArticle 1 – paragraph 19, Article 32 – paragraph 8: 8. The request referred to in paragraphs 7 and 7a shall not be made public.

Added(9b) in Article 19, paragraph 2 is deleted;

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Added(9c) Article 20 is amended as follows:

RemovedArticle 1 – paragraph 19, Article 32 – paragraph 9: 9. After having received the request referred to in paragraphs 7 and 7a, the Commission shall, without undue delay and, on the basis of the reasons and evidence provided by ESMA, do either of the following:

Added(a) the following paragraph is inserted:

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Added‘2a. Each individual transaction shall be made public once through a single APA.’;

RemovedArticle 1 – paragraph 20, Article 32a (new) – title: Suspension of the trading obligation

Added(b) in paragraph 3, point (c) is deleted;

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Added(9d) Article 21 is amended as follows:

RemovedArticle 1 – paragraph 20, Article 32a – paragraph 1 – point c a (new): (ca) regularly trades derivatives subject to the derivatives trading obligation with non-EEA market makers which have no active membership on a Union-based organised trading facility that offers trading between investment firms that act as market makers in the derivative subject to the trading obligation.

Added(a) paragraph 1 is replaced by the following:

RemovedThe COM proposal addresses the impact of the dealer-to-customer market by allowing for the temporary suspension when receiving client quotes from counterparties with no active membership on an EU trading venue. However, this solution does not address the dealer-to-dealer market for CDS in Europe. Introducing the possibility of suspensions for dealer-to-dealer platforms ensures that EU firms can easily use EU clearing services on the CDS markets, directly supporting the EU agenda to support the competitiveness of EU CCPs and clearing in the EU.

Added‘1. Investment firms which, either on own account or on behalf of clients, conclude transactions in bonds, structured finance products and emission allowances traded on a trading venue, or derivatives subject to the clearing obligation set out in Article 4 of Regulation (EU) No 648/2012, shall make public the volume and price of those transactions and the time at which they were concluded. That information shall be made public through an APA.’;

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Added(b) paragraph 4 is replaced by the following:

RemovedArticle 1 – paragraph 20, Article 32a – paragraph 2: 2. When assessing whether to suspend the derivatives trading obligation in accordance with paragraph 1(a) to (c) of this Article, the Commission shall take into account whether such suspension of the trading obligation would have a distortive effect on the clearing obligation laid down in Article 4(1) of Regulation (EU) No 648/2012. / When assessing whether to suspend the derivatives trading obligation in accordance with paragraph 1(d) of this Article, the Commission shall ensure that investment firms benefitting from the suspension clear these derivatives in a central counterparty authorised in accordance with Regulation (EU) 2012/648. / The Commission shall also contact other Member States to assess whether investment firms in Member States other than that making the request in accordance with paragraph 1 are in a situation similar to those in the requesting Member State or States. Member States that did not file a request pursuant to paragraph 1 may, after adoption of the implementing act mentioned in paragraph 1, request that investment firms that are in a situation similar to those in the requesting Member State of States are added to the implementing act. The competent authority of the Member State or States making that request shall indicate and demonstrate why it considers that the conditions for a suspension are also met.

Added‘4. Competent authorities shall be able to authorise investment firms to provide for deferred publication of price or volume on the same conditions as laid down in Articles 11.’;

RemovedEnsuring alignment with the clearing obligation and taking into account the wish expressed by several market participants to allow for a European mechanism ensuring that, once a MS requests a suspension of the DTO, all EU firms in a similar situation can also benefit from the exemption. The proposed amendment will avoid introducing unequal treatment between investment firms affected by a potential targeted suspension of the DTO while maintaining a thorough review process by relevant public authorities.

Added(c) in paragraph 5, the introductory part is replaced by the following:

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Added‘5. ESMA shall develop draft regulatory technical standards in such a way as to enable the publication of information required under Article 27h of this Regulation to specify the following:’;

RemovedArticle 1 – paragraph 20, Article 32a – paragraph 5: 5. The Commission shall regularly review whether the grounds for the suspension of the derivatives trading obligation continue to apply.’;

Added(d) in paragraph 5, point (c) is deleted.;

RemovedRegulation (EU) 600/2014

Added(9e) the following Article is inserted:

RemovedArticle 1 – paragraph 21 – point b a (new), Article 35 – paragraph 4: (ba) paragraph 4 is replaced by the following: / ‘4. The competent authority of the CCP or that of the trading venue shall grant a trading venue access to a CCP only where such access would not threaten the smooth and orderly functioning of the markets, in particular due to liquidity fragmentation, or would not adversely affect systemic risk. / (deleted) / (deleted) / (deleted) / (deleted) / If a competent authority refuses access it shall issue its decision within two months following receipt of the request referred to in paragraph 2 and provide full reasons to the other competent authority, the CCP and the trading venue including the evidence on which the decision is based.’;

Added‘Article 21a

Removed(https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A02014R0600-20220101)

AddedDesignated reporting entity

RemovedDeleted parts of paragraph 4 since ETDs would no longer be covered and the provisions would then no longer be relevant. Also outlining a more explicit process for granting access by NCAs. Currently, the absence of a refusal of access is used as a basis for granting access, but this is rather implicit and created quite a lot of uncertainty.

Added1. Where only one party to a transaction is a designated reporting entity in accordance with paragraph 3 of this Article, it shall be responsible for the disclosure of transactions through an APA in accordance with Article 20(1) or Article 21(1).

RemovedRegulation (EU) No 600/2014

Added2. Where none of the parties to a transaction, or both of the parties to a transaction are designated reporting entities in accordance with paragraph 3, only the entity that sells the financial instrument concerned shall make the transaction public through an APA.

RemovedArticle 1 – paragraph 22 – point b a (new), Article 36 – paragraph 4: (ba) paragraph 4 is replaced by the following: / ‘4. The competent authority of the trading venue or that of the CCP shall grant a CCP access to a trading venue only where such access would not threaten the smooth and orderly functioning of the markets, in particular due to liquidity fragmentation and the trading venue has put in place adequate mechanisms to prevent such fragmentation, or would not adversely affect systemic risk. / (deleted) / (deleted) / (deleted) / (deleted) / If a competent authority denies access it shall issue its decision within two months following receipt of the request referred to in paragraph 2 and provide full reasons to the other competent authority, the trading venue and the CCP including the evidence on which its decision is based.’;

Added3. Upon request to ESMA, investment firms shall obtain the status of designated reporting entity for specific financial instruments or classes of financial instruments. All systematic internalisers shall be considered to be designated as reporting entities for the financial instruments or classes of financial instruments for which they are systematic internaliser.

Removed(https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A02014R0600-20220101)

Added4. ESMA shall establish a register of all designated reporting entities, specifying the identity of the designated reporting entities, including the systematic internalisers, as well as the instruments or classes of instruments for which they are designated reporting entities.’;

RemovedSame as previous amendment.

Added(9f) in Article 22(1), the introductory part is replaced by the following:

RemovedRegulation (EU) No 600/2014

Added‘In order to carry out calculations for determining the requirements for the pre- and post-trade transparency and the trading obligation regimes referred to in Articles 3 to 11, Articles 14 to 21 and Article 32, which are applicable to financial instruments and for determining whether an investment firm is a systematic internaliser, and to prepare annual reports to the Commission in accordance with Article 4(4), Article 9(2), Article 7(1) and Article 11(1), ESMA and competent authorities may require information from:’;

RemovedArticle 1 – paragraph 24, Article 38g – paragraph 1 – introductory part: Where ESMA finds that a person listed in Article 38b(1), point (a), has not complied with any of the requirements laid down in Article 20, 21, 22, 22a, 22b or 26, or Title IVa, it shall take one or more of the following actions:

Added(10) the following Articles 22a, 22b and 22c are inserted:

RemovedThe reference to Title IVa only allows sanctioning violations of DRSP’s organisational requirements, and leaves outside some other provisions, such as Articles 20, 21 and 22 setting forth the APA publication and reporting requirements.Amendment includes reference to any of the requirements laid down in this regulation.It should be considered in the negotiations that the lack of an explicit definition of infringements may expose ESMA to legal challenges when imposing sanctions. For this reason, the insertion of a lost of infringements may be warranted.