Following the entry into force of MiFID II and associated increase in systematic internalisers (SIs) reported volumes, EU policymakers’ attention has focused on the non-application of the tick size regime to SIs and the implications of this exemption for the effectiveness of EU public equities markets.
In the context of the Investment Firm Review (IFR), amendments have been tabled in the European Parliament to extend the application of tick sizes to SIs.
In light of these developments, Euronext calls on EU policymakers to ensure a level playing field between trading venues and SIs and supports applying the tick size regime to SI and trading venue activity up to large-in-scale (LIS).
Euronext’s Position on the Extension of the Tick Size Regime to Systematic Internalisers (SIs)
Policymakers’ attention is currently focused on the non-application of the tick size regime to SIs and the implications of this exemption for the effectiveness of EU public equities markets. This concern has been translated into a proposed amendment from the European Parliament to extend the tick size regime to SIs in the context of the Investment Firm Reform (IFR). With the Council having recently adopted its position on the IFR proposals, Euronext believes it is timely to consider some issues of relevance to the ongoing trialogue discussions.
Euronext believes that it is acceptable for large-in-scale (LIS) trades executed on SIs and Trading Venues, and trades that are non-price forming, to be exempt from the tick size regime. In particular:
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A level playing field should exist between trading venues and SIs. Euronext supports extending the tick size regime to SIs up to LIS, recognising the fact that over applying the tick size regime may raise issues in respect of above LIS transactions. Above LIS, if SIs are exempted from applying tick sizes, then so should Trading Venues.
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MiFID II recognises that non-price forming trades (regardless of the size) may be exempted from tick sizes because they are not subject to the shares trading obligation. As such, these trades are still allowed for OTC execution and not subject to any tick size requirement when executed OTC.
Downloads
Euronext Position Paper on EXTENSION OF THE TICK SIZE REGIME TO SYSTEMATIC INTERNALISERS (SIs)