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:
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.
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.
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.
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.
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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.
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.