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8. In developing the technical standards on the list of information required from applicant investmentfirms and on the consultation process between NCAs, ESMA aims to limit the practice of ‘jurisdictionshopping’ for the purpose of regulatory arbitrage, as per Recital 46 of MiFID II (Recital 22 of MiFIDI).9. To this end, the programme of operations should: (i) provide detailed information on the geographicaldistribution and activities to be carried out by the investment firm in the EEA, in order to enableNCAs to assess, after consultation with other relevant NCAs and ESMA (where appropriate), the extentto which activities will be carried out in each Member State; and (ii) assess whether the investmentfirm may have opted for the regulatory system of one Member State for the purpose of evadingthe stricter standards in force in another Member State within the territory of which it intends to carryon or does carry on the greater part of its activities. Relevant information in the programme of operationsshould include:i.ii.identity of direct marketers, financial investment advisers and distributors, geographical localisa-tion of their activity.iii.the domicile of prospective customers/targeted investors (in order to assess whether they aremostly present in another Member State);marketing and promotional activity and arrangements, including languages of the offering andpromotional documents; identification of the Member States where advertisements are most visibleand frequent; type of promotional documents (in order to assess where effective marketingwill be mostly developed); andQ3: Do you consider that the list of information set out in point 6 should be providedto Home State NCAs? If not, what other information should ESMA consider?Q4: Are there any other elements which may help to assess whether the main activitiesof an applicant investment firm is not in the territory where the application ismade?Q5: How much would one-off costs incurred during the authorisation process increase,compared to current practices, in order to meet the requirements suggestedin this section?Q6: Are there any particular items of information suggested above that would takesignificant time or cost to produce and if so, do you have alternative suggestionsthat would reduce the time/cost for firms yet provide the same assurance toNCAs?22
2.2. Freedom to provide investment services and activities / Establishmentof a branchBackground/Mandate/Empowerment1. Articles 34(8) and 35(11) of MiFID II require ESMA to develop technical standards in relation to thenotification of information to be provided by investment firms and credit institutions exercising theirrights under the freedom to provide services, or the freedom of establishment.Article 34(8) MiFID IIESMA shall develop draft regulatory technical standards to specify the information to be notified inaccordance with paragraphs 2, 4, 5 and 7.ESMA shall submit those draft regulatory technical standards to the Commission by [...].Article 35(11) MiFID IIESMA shall develop draft regulatory technical standards to specify the information to be notified inaccordance with paragraphs 2, 4, 7 and 10.ESMA shall submit those draft regulatory technical standards to the Commission by [...].Analysis2. MiFID II broadly reflects the existing provisions and procedures for passporting set out in MiFID.There are, however, two notable differences:i.ii.the requirement under Article 34(2)(b) for investment firms to communicate to the home stateNCA the identity of any tied agents it proposes to use under the freedom to provide services; andAnnex I of MiFID II includes the new activity (9) of Operation of Organised Trading Facilities(OTFs).3. Given the relative consistency between MiFID II and MiFID I on these topics, ESMA considers thatthe development of technical standards in this area should draw significantly on existing CESR work.Specifically, ESMA considers that the CESR work on the passport under MiFID (which includes: arecommendation 20 , a Consultation Paper 21 and a feedback statement 22 ) should be considered whendeveloping proposals to consolidate existing practices into binding technical standards. However, asfor the previous section of this Discussion Paper on ‘Authorisation of investment services’, ESMAconsiders that adjustments to existing standards will be necessary.20CESR/07-337b.21CESR/ 06-669.22CESR/07-318.23
Page 2 and 3: Date: 22 May 2014ESMA/2014/548Respo
Page 4 and 5: 4.3.4.4.4.5.4.6.4.7.4.8.Security of
Page 6 and 7: 8.3.8.4.8.5.Rules to establish the
Page 8 and 9: CRD IVCRRCSDCSFCTCTPDADEADPEBAECECB
Page 10 and 11: NCANDFNTWNFCOISOJOTCOTFPRIIPsQ&ARDS
Page 12 and 13: 1.OverviewReasons for publication1.
Page 14 and 15: nical advice to the Commission. Res
Page 16 and 17: Forum of European Securities Commis
Page 18 and 19: (EU) No 575/2013 (Capital Requireme
Page 20: ii.Forecast information at an indiv
Page 25 and 26: 2.3. Best execution - publication o
Page 27 and 28: Q8: Do you agree data should be pro
Page 29 and 30: effective and realised spread: The
Page 31 and 32: There are alternative available app
Page 33 and 34: 29. ESMA’s objective in setting s
Page 35 and 36: Section B: United States SEC Rule 6
Page 37 and 38: 2.4.Best execution - publication of
Page 39 and 40: quality data and the venues that in
Page 41 and 42: minimum standard to constitute taki
Page 43 and 44: 32. Other European legislation prov
Page 45 and 46: Annex 2.4.1. Detail of proposals re
Page 47 and 48: 3.Transparency3.1.Pre-trade transpa
Page 49 and 50: 7. Under the current MiFID framewor
Page 51 and 52: 13. The large in scale waiver is de
Page 53 and 54: 24. ESMA is mindful, however, that
Page 55 and 56: Chart 2: Pre/post-trade transparenc
Page 57 and 58: an additional argument in favour of
Page 59 and 60: 43. The analysis required two steps
Page 61 and 62: ADTNumber ofcertificates% of certif
Page 63 and 64: Q58: Do you agree with ESMA’s vie
Page 65 and 66: […]2. The reference price referre
Page 67 and 68: […](b) systems that formalise neg
Page 69 and 70: transactions between members or par
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carried out under the reference pri
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88. In addition, collecting data fr
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to the order book. Therefore these
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3.2.Post-trade transparency - Equit
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7. The existing Implementing Regula
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‘R’‘NTV’‘NTI’‘NTC’R
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Q82: Do you agree with the definiti
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i.ii.iii.to shorten the maximum del
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(which is the minimum pre-trade tra
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would be reduced by aligning pre-tr
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ETFsQ85: Which of the two options d
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Cla ss in ter m s of A DT A DT< 2 0
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during normal trading hours. Transp
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15. As part of the MiFID II review,
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MA believes the liquidity threshold
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Power is delegated to the Commissio
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prices according to a specified ben
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3.5. Introduction to the non-equity
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SharesMiFID II 4(44)(1)(a)ETFMiFID
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20. Structured Finance Products are
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guishing factor singled out in Sect
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47. More generally ESMA considers t
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Corporate bonds would be defined by
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mation for non-equity instruments f
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i.ii.Option 1: The ‘average size
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24. The requirements relating to tr
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Q110: Do you agree with the propose
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Periodic assessment of the liquidit
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Scenario Scenario Scenario Scenario
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on whether in its view the suspensi
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notification to ESMA, the relevant
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1. BondsFinancialinstrumentProduct
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Financialinstrum entProduct ty pesS
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Annex 3.6.2. Preliminary analysis f
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74. In general, when applying semi-
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Table 2.2 - Analysis results - scen
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Page 145 and 146:
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Annex 3.6.3. COFIA versus IBIA147
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5. The definition of the scope in t
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Quote-driven trading systemPeriodic
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the pre-trade information being mad
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3.8. Post-trade transparency requir
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13. In summary, ESMA suggests publi
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Identifier Name of trade flag Venue
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Proposal29. Under the current trans
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secondly, it has to decide whether
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ten too long to ensure adequate tra
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Size of transactionDeferral period,
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views on which criteria and/or cond
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ESMA shall develop draft regulatory
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. Disadvantages: the drawback to th
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23. In this preliminary phase, ESMA
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3.10.Size specific to the instrumen
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MiFIR, any transaction that is abov
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3.11.The Trading Obligation for Der
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8. The requirement under Article 28
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in Article 28(1), but for which no
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ceived authorisation’ (in the tab
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iii.iv.Whether the ‘average size
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9. The Commission shall be empowere
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3.13. Article 22, MiFIR: Providing
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in advance of the date on which the
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4.Microstructural issues4.1.Microst
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Q186: Do you agree with the definit
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23. In ESMA’s preliminary view,
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37. In undertaking this self-assess
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40. In that regard, an important co
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k. the firm’s ownership and gover
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4.2. Organisational requirements fo
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12. For algorithms and trading stra
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iv.the nature of the change.Q199: D
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vided by the trading venue to which
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44. ESMA does not envisage a specif
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and risk controls to ensure the tra
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compliance staff are aware when con
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Organisational requirements for inv
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84. Firms should maintain accurate,
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ProposalGeneral91. Investment firms
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101. In this context, ESMA would li
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112. To comply with these obligatio
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ii.iii.iv.v.vi.vii.viii.internal ri
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Q221: Are there any criteria other
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trading venues should have standard
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a. number of messages received per
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Trading venues’ capacityAnalysis1
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Q234: Do you agree with the above a
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iv.v.suspension of access;intervent
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ii.functional tests should include
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cess the market having those system
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ESMA shall develop draft regulatory
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i.ii.regardless of the system used
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4.4. Market making strategies, mark
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8. Firstly, Recital 60 of MiFID II
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Q264: Do you agree with the above a
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liquidity to the market on a regula
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. impede compliance with the obliga
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trade finance provider. Significant
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45. When establishing market making
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For example, one possible solution
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5. On the basis of this analysis an
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Q298: What is your view regarding a
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4.6.Co-location (Article 48(8) of M
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Fair, non-discriminatory and transp
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chargeable activity (an activity th
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undertake for the same purposes, fi
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although not prohibited, ESMA does
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4.8.Tick sizes (Article 48(6) and A
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Q330: Do you agree with the general
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ii.despite the extra granularity, t
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Financial instruments traded on a t
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ently traded with a tick of 0.01 ha
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is proposed not to implement any su
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55. In taking into account the liqu
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tick falls below two, apply SAF.Ann
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How the tick size regime would be k
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Annex 4.8.1. Technical Annex for Op
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83. Finally, the NCA made a statist
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90. Note that 90% of the turnover i
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per trading day. This indicator has
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done manually or by adding a new co
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Liquidityrange:200 - 499Liquidityra
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Annex 4.8.2. Technical Annex for Op
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110. The proposed regime will requi
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Step 2: Placing the instrument base
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of ISIN equitiesunchangedNumber ofe
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7. The material requirements that A
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329
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5.2. Additional requirements for pa
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cases where their name varies with
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4. The empowerments under Articles
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5.5.Data disaggregationBackground/M
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Q371: Do you agree that venues shou
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parties publish the trade, unsure o
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Article 36(6)(a), MiFIRESMA shall d
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come a clearing member of the CCP (
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Q386: Given there will be costs to
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Analysis and proposal34. Under Arti
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39. ESMA’s preliminary view is th
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Q403: The approach above relies on
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ferent trading venues as to whether
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5.8. Non- discriminatory access to
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Figure 3: this diagram illustrates
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order to ensure their users underst
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Methodology25. ESMA notes that the
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Q427: Do you agree that trading ven
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iii.Termination: These are standard
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(ii) Termination should not be trig
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meaningfully different from any exi
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6.Requirements applying on and to t
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3. When assessing whether units in
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transferable securities, units in c
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arrangements and ask for experience
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vi.The notified CAs communicate the
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the communication of the lifting of
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27. Regarding the timing, ESMA cons
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group level. When specifying the cr
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anking activities should not be con
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MiFID scope: exemptnot exemptPhysic
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16. Article 2(4) of MiFID II furthe
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Q464: Do you see any difficulties i
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30. The term ‘capital’ may be i
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37. The size of the trading activit
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43. In accordance with EMIR impleme
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50. Recital 21 of MiFID II stipulat
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qualify for an exemption from MiFID
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7. There is no text with equivalent
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that the definition is “a natural
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delivery (e.g. quantity per lot, gr
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38. In ensuring that the position l
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Q501: Do you agree with ESMA’s ap
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61. Article 57(3) MiFID II sets out
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ipants may lead to a participant ha
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90. “All months” forward positi
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Q522: Do you agree with this approa
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Q525: What trading venues or jurisd
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7.3.Position ReportingBackground/Ma
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lowances that are held by certain c
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21. Both Article 58(2) and Article
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Q537: What are your views on these
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tion limit regime will also need to
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Numberof positionholdersin eachcate
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What constitutes a transaction and
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12. For the avoidance of doubt, ESM
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Transmission of an order17. Investm
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a designation to identify the perso
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if the client has a place of reside
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count (beneficiary) is not necessar
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discretionary mandate to makeinvest
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An order worked manuallyi.e. where
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ii.Article 9(1) of MiFIR - Granting
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93. ESMA proposes that this informa
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client as principal and the client
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sets out below a number of consider
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The application of transaction repo
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142. The reports of transactions in
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Annex 8.1.1. Table of fieldsFIELDDE
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171819ConsiderationVenue of executi
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different fromcounterparty) -identi
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identification code typeLegal entit
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welcome feedback on this issue.62In
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Where the reporting firm acted in a
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Annex 8.1.2. Diagram on client ID47
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a. When the instrument ceases to be
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instruments being rejected, the nex
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der the ISO 10962 standard 219 , se
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LEI, which is provided in the ‘Is
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lying index where applicableCountry
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Field nameInstrument classification
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Rules to establish the Relevant Com
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495Termination (delisting)date of t
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5. Regarding the requirement to kee
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Disadvantages of option 216. This w
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Q578: In your view, which option (a
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firm responsible for the investment
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Q584: Do you believe that this appr
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i.ii.1: Limit Order 224 ; and2: Sto
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Good-Til-SpecifiedDate and TimeVali
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Identification code of theinstrumen
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NewRejectedReceipt of a new order b
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Q598: Do you foresee any difficulti
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5. This Discussion Paper deals with
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ii.iii.each placed order’s sequen
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7. IOSCO’s report on Technologica
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Q602: Would you prefer a synchronis
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5. When specifying the relevant fra
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CM to the CCP. In fact, the CCP wou
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24. When the CCP has received the i
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Q613: What are your views on the tr
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2), whereas MIFIR provides that bec
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