MiFIR applies to the financial instruments where the underlying instrument is ToTV (Traded on Trading Venue). What’s a trading venue? See below the 3 categories of trading venue:
- Regulated Market (RM)
- Multilateral Trading Facility (MTF)
- Organised Trading Facility (OTF)
We’ve also designed an explanatory infographic to help you grasp the concept easier! Many people have enquired about whether a systematic internaliser is trading venue. We’ve got an answer for you too.
| Regulated Market (RM) | Organised Trading Facility (OTF) | Multilateral Trading Facility (MTF) | |
|---|---|---|---|
| Features | - Operated by market operator - Authorised by NCA under MiFID II (Title III) as regulated market - No discretion in execution - Examples: London Stock Exchange, Euronext London, Cyprus Stock Exchange | - Not an RM or MTF - Authorised by NCA under MiFID II (Title III) as investment firm - Interests in bonds, structured finance products, emission allowances or derivatives - Has discretion in execution - Examples: Cube Investing, Mariana Capital, Reyker | - Operated by investment firm or market operator - Authorised by NCA under MiFID II (Title III) as investment firm - No discretion in execution - Examples: UBS MTF, Sigma X |
| Restrictions | - Cannot deal on own account - Cannot act as matched principal | - Cannot deal on own account - Cannot act as matched principal in limited circumstances - Need to be licensed - Conduct of business requirements | - Cannot deal on own account - Cannot act as matched principal |
Regulated Market (RM)
It’s a multilateral system operated and/or managed by a market operator, which brings together or facilitates the bringing together of multiple third-party buying and selling interests in financial instruments in accordance with non-discretionary rules.
Multilateral Trading Facility (MTF)
It’s a multilateral system operated by an investment firm or a market operator, which brings together multiple third-party buying and selling interests in financial instruments in in accordance with non-discretionary rules.
Organised Trading Facility (OTF)
It’s a multilateral system which is not a regulated market or an MTF and in which multiple third-party buying and selling interests in bonds, structured finance products, emission allowances or derivatives are able to interact in the system in a way that results in a contract. Unlike RMs and MTFs, operators of an OTF have some discretion in execution.
Are Systematic Internalizers a type of trading venue?
No, Systematic Internalizers are counterparty, not a trading venue. Systematic Internalizers are firms which, on an organised, frequent, systematic and substantial basis, deal on own account when executing client orders outside a regulated market, an MTF or an OTF.
MiFID II does not allow an SI to bring together third party buying and selling interests in functionally the same way as a trading venue.
What about OTC transactions?
Financial instruments whose immediate underlying is admitted to trading on a trading venue are also subject to MiFID II requirements, even when these instruments are traded off-venue e.g. OTC derivative contracts that are deemed to be ‘economically equivalent’ to the venue-listed instruments.
