1.CONTEXT OF THE DELEGATED ACT
Directive 2014/65/EU ('MiFID II') of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/62/EU 1 is due to become applicable on 3 January 2018 and, together with Regulation (EU) No 600/2014 2 (MiFIR), replace Directive 2004/39/EC 3 . MiFID II and MiFIR provide an updated harmonised legal framework governing the requirements applicable to investment firms, regulated markets, data reporting services providers and third country firms providing investment services or activities in the Union.
MiFID II and MiFIR aim to enhance the efficiency, resilience and integrity of financial markets, notably by:
1.Achieving greater transparency: introduction of a pre- and post-trade transparency regime for non-equities and strengthening and broadening of the existing equities trade transparency regime;
2.Bringing more trading onto regulated venues: creation of a new category of platforms to trade derivatives and bonds - the Organised Trading Facilities - and of a trading obligation for shares on regulated venues as well as a clear separation between bilateral and multilateral execution venues.
In light of alleged nascent industry initiatives building on the ambiguity around the notion of "trading on own account when executing client orders" which define the activity of systematic internalisers, it is necessary to further specify the definition of systematic internaliser to address those market developments and circumscribe the risk of circumvention of MiFID 2.
This Commission Delegated Regulation is based on the empowerment set out in Article 4(2) of Directive 2014/65/EU, which grants powers to the Commission to adopt delegated acts to specify some technical elements of the definitions laid down in Article 4(1) of Directive 2014/65/EU, to adjust them to market developments, technological developments and experience of behaviour that is prohibited under Regulation (EU) No 596/2014 4 and to ensure the uniform application of Directive 2014/65/EU. As the definition of "systematic internaliser" is laid down in Article 4(1)(20) of Directive 2014/65/EU and specified in Commission Delegated Regulation (EU) No 2017/565 supplementing Directive 2014/65/EU of the European Parliament and of the Council as regards organisational requirements and operating conditions for investment firms and defined terms for the purposes of that Directive 5 , this Commission Delegated Regulation amends Commission Delegated Regulation (EU) No 2017/565.
This Commission Delegated Regulation was not preceded by an impact assessment, since it neither has nor is intended to have the consequence of changing the regulatory requirements for investment firms. Instead it merely clarifies the precise scope of the definition of "systematic internaliser" to ensure uniform application of this term and avoid circumvention.
2.CONSULTATIONS PRIOR TO THE ADOPTION OF THE ACT
The Commission services had numerous meetings with a range of stakeholders to discuss the present measure throughout 2016 and the first half of 2017. The Commission has also had extensive exchanges with Members of the European Parliament's Committee on Economic and Monetary Affairs (ECON Committee) and held consultation of the Expert Group of the European Securities Committee (EGESC), during which this Delegated Act was consulted upon among Member States’ experts and involving observers from the European Parliament, the Council, the European Central Bank and the European Securities and Markets Authority (ESMA).
3.LEGAL ELEMENTS OF THE DELEGATED ACT
The Delegated Act contains one operational provision which provides further technical specification of one element of the definition of systematic internaliser as defined in Article 4(1)(20) of Directive 2014/65/EU. This Commission Delegated Regulation will amend Commission Delegated Regulation (EU) No 2017/565.
To ensure the smooth implementation of Commission Delegated Regulation (EU) No 2017/565, it is necessary that this amending Commission Delegated Regulation enters into force as a matter of urgency.
COMMISSION DELEGATED REGULATION (EU) …/...
amending Delegated Regulation (EU) 2017/565 as regards the specification of the definition of systematic internalisers for the purposes of that Directive
(Text with EEA relevance)
THE EUROPEAN COMMISSION,