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MAR 5.7 Pre- and post-trade transparency requirements for equity and non- equity instruments: form of waiver and deferral

MAR 5.7.1 R
  1. (1)

    1Unless (2),(3) or (4) applies,2 in respect of shares admitted to trading on a regulated market, a firm operating an MTF must make public, on reasonable commercial terms and on a continuous basis during normal trading hours:

    1. (a)

      the current bid and offer prices which are advertised through its systems; and2

    2. (b)

      the depth of trading interests at those prices.2

[Note: Article 29(1) of MiFID]

  1. (2)

    Paragraph (1) does not apply to systems operated by an MTF to the extent that those systems satisfy one of the criteria in (a) or (b), subject to (c):2

    1. (a)

      they must be based on a trading methodology by which the price is determined in accordance with a reference price generated by another system, where that reference price is widely published and is regarded generally by market participants as a reliable reference price;2

    2. (b)

      they formalise negotiated transactions, each of which meets one of 3the criteria in (i) and (ii), subject to the provisions in (iii) and (iv):2

      1. (i)

        it is made at or within the current volume weighted spread reflected on the order book or the quotes of the market makers of the MTF operating that system or, where the share is not traded continuously, within a percentage of a suitable reference price, being a percentage and a reference price set in advance by the system operator;2

      2. (ii)

        it is subject to conditions other than the current market price of the share.2

      3. (iii)

        For the purposes of (b), the other conditions specified in the rules of the MTF for a transaction of this kind must also have been fulfilled.2

      4. (iv)

        Negotiated transaction has the meaning given in Article 19 of the MiFID Regulation.2

      [Note: Article 19 of the MiFID Regulation is reproduced in MAR 5.7.9 EU.]2

    3. (c)

      In the case of systems having functionality other than as described in (a) or (b), the disapplication does not apply to that other functionality.2

  2. (3)

    Paragraph (1) does not apply in relation to orders held in an order management facility maintained by the MTF pending their being disclosed to the market.2

  3. (4)
    1. (a)

      Paragraph (1) does not apply in relation to orders that are large in scale compared to normal market size for the share or type of share in question.2

    2. (b)

      An order will be considered to be large in scale if it meets the criteria set out in Article 20 of the MiFID Regulation.2

    [Note: Article 20 of the MiFID Regulation is reproduced in MAR 5.7.10 EU.]2

MAR 5.7.1A D

4A firm that makes an application to the FCA for a waiver in accordance with articles 4 or 9 of MiFIR (in relation to pre-trade transparency for equity or non-equity instruments) must make it in the form set out in MAR 5 Annex 1D.

[Note: articles 4 and 9 of MiFIR, MiFID RTS 1 and MiFID RTS 2]

MAR 5.7.1C D

4A firm intending to apply to the FCA for deferral in accordance with articles 7 or 11 of MiFIR in relation to post-trade transparency for equity or non-equity instruments must apply in writing to the FCA.

[Note: articles 7 and 11 of MiFIR, MiFID RTS 1 and MiFID RTS 2]

Pre-trade information

MAR 5.7.2 EU

1.

An investment firm or market operator operating an MTF or a regulated market shall, in respect of each share admitted to trading on a regulated market that is traded within a system operated by it and specified in Table 1 of Annex II [of the MiFID Regulation], make public the information set out in paragraphs 2 to 6.

2.

Where one of the entities referred to in paragraph 1 operates a continuous auction order book trading system, it shall, for each share as specified in paragraph 1, make public continuously throughout its normal trading hours the aggregate number of orders and of the shares those orders represent at each price level, for the five best bid and offer price levels.

3.

Where one of the entities referred to in paragraph 1 operates a quote-driven trading system, it shall, for each share as specified in paragraph 1, make public continuously throughout its normal trading hours the best bid and offer by price of each market maker in that share, together with the volumes attaching to those prices.

The quotes made public shall be those that represent binding commitments to buy and sell the shares and which indicate the price and volume of shares in which the registered market makers are prepared to buy or sell.

In exceptional market conditions, however, one-way prices may be allowed for a limited time.

4.

Where one of the entities referred to in paragraph 1 operates a periodic auction trading system, it shall, for each share specified in paragraph 1, make public continuously throughout its normal trading hours the price that would best satisfy the system's trading algorithm and the volume that would potentially be executable at that price by participants in that system.

5.

Where one of the entities referred to in paragraph 1 operates a trading system which is not wholly covered by paragraph 2 or 3 or 4, either because it is a hybrid system falling under more than one of those paragraphs or because the price determination process is of a different nature, it shall maintain a standard of pre-trade transparency that ensures that adequate information is made public as to the price level of orders or quotes for each share specified in paragraph 1, as well as the level of trading interest in that share. In particular, the five best bid and offer price levels and/or two-way quotes of each market maker in that share shall be made public, if the characteristics of the price discovery mechanism permit it.

6.

A summary of the information to be made public in accordance with paragraphs 2 to 5 is specified in Table 1 of Annex II [of the MiFID Regulation].

[Note: Article 17 of the MiFID Regulation]

Table 1: Information to be made public in accordance with Article 17

MAR 5.7.3 EU

Type of system

Description of system

Summary of information to be made public, in accordance with Article 17

Continuous auction order book trading system

A system that by means of an order book and a trading algorithm operated without human intervention matches sell orders with matching buy orders on the basis of the best available price on a continuous basis

The aggregate number of orders and the shares they represent at each price level, for at least the five best bid and offer price levels

Quote-driven trading system

A system where transactions are concluded on the basis of firm quotes that are continuously made available to participants, which requires the market makers to maintain quotes in a size that balances the needs of members and participants to deal in a commercial size and the risk to which the market maker exposes itself

The best bid and offer by price of each market maker in that share, together with the volumes attaching to those prices

Periodic auction trading system

A system that matches orders on the basis of a periodic auction and a trading algorithm operated without human intervention

The price at which the auction trading system would best satisfy its trading algorithm and the volume that would potentially be executable at that price

Trading system not covered by first three rows

A hybrid system falling into two or more of the first three rows or a system where the price determination process is of a different nature than that applicable to the types of system covered by first three rows

Adequate information as to the level of orders or quotes and of trading interest; in particular, the five best bid and offer price levels and/or two-way quotes of each market maker in the share, if the characteristics of the price discovery mechanism so permit

[Note: Table 1, Annex II of the MiFID Regulation]

Publication of pre-trade information

MAR 5.7.4 EU

1.

A regulated market, MTF or systematic internaliser shall be considered to publish pre-trade information on a continuous basis during normal trading hours if that information is published as soon as it becomes available during the normal trading hours of the regulated market, MTF or systematic internaliser concerned, and remains available until it is updated.

2.

Pre-trade information … shall be made available as close to real time as possible. …

[Note: Article 29(1) and (2) of the MiFID Regulation]

MAR 5.7.5 EU

Information which is required to be made available as close to real time as possible should be made available as close to instantaneously as technically possible, assuming a reasonable level of efficiency and of expenditure on systems on the part of the person concerned. The information should only be published close to the three minute maximum limit in exceptional cases where the systems available do not allow for a publication in a shorter period of time.

[Note: Recital (18) to the MiFID Regulation]

Disapplication of the pre-trade transparency requirements

MAR 5.7.6 G

The obligation in MAR 5.7.1 R (1)2to make public certain pre-trade information is disapplied in MAR 5.7.1 R (2)2based on the market model or the type and size of orders in the cases identified in the MiFID Regulation, and as reproduced for reference in MAR 5.7.8 EU, MAR 5.7.9 EU, MAR 5.7.10 EU and MAR 5.7.11 EU. In particular, the obligation is disapplied2 in respect of transactions that are large in scale compared with the normal market size for the share or type of share in question.

[Note: Article 29(2) of MiFID and Recital 12 and Articles 18, 19, 20, 33 and 34 of the MiFID Regulation]

MAR 5.7.7 EU

If granting waivers in relation to pre-trade transparency requirements, or authorising the deferral of post-trade transparency obligations, competent authorities should treat all regulated markets and MTFs equally and in a non-discriminatory manner, so that a waiver or deferral is granted either to all regulated markets and MTFs that they authorise under [the MiFID] Directive 2004/39/EC, or to none. Competent authorities which grant the waivers or deferrals should not impose additional requirements.

[Note: Recital 12 to the MiFID Regulation]

MAR 5.7.8 EU

1.

Waivers in accordance with Article 29(2) and 44(2) of [the MiFID] Directive 2004/39/EC may be granted by the competent authorities for systems operated by an MTF or a regulated market, if those systems satisfy one of the following criteria:

(a)

they must be based on a trading methodology by which the price is determined in accordance with a reference price generated by another system, where that reference price is widely published and is regarded generally by market participants as a reliable reference price;

(b)

they formalise negotiated transactions, each of which meets one of 3the following criteria:

(i)

it is made at or within the current volume weighted spread reflected on the order book or the quotes of the market makers of the regulated market or MTF operating that system or, where the share is not traded continuously, within a percentage of a suitable reference price, being a percentage and a reference price set in advance by the system operator;

(ii)

it is subject to conditions other than the current market price of the share.

For the purposes of point (b), the other conditions specified in the rules of the regulated market or MTF for a transaction of this kind must also have been fulfilled.

In the case of systems having functionality other than as described in points (a) or (b), the waiver shall not apply to that other functionality.

2.

Waivers in accordance with Articles 29(2) and 44(2) of [the MiFID] Directive 2004/39/EC based on the type of orders may be granted only in relation to orders held in an order management facility maintained by the regulated market or the MTF pending their being disclosed to the market.

[Note: Article 18 of the MiFID Regulation]

MAR 5.7.9 EU

For the purpose of Article 18(1)(b) [of the MiFID Regulation] a negotiated transaction shall mean a transaction involving members or participants of a regulated market or an MTF which is negotiated privately but executed within the regulated market or MTF and where that member or participant in doing so undertakes one of the following tasks:

(a)

dealing on own account with another member or participant who acts for the account of a client;

(b)

dealing with another member or participant, where both are executing orders on own account;

(c)

acting for the account of both the buyer and seller;

(d)

acting for the account of the buyer, where another member or participant acts for the account of the seller;

(e)

trading for own account against a client order.

[Note: Article 19 of the MiFID Regulation]

MAR 5.7.10 EU

An order shall be considered to be large in scale compared with normal market size if it is equal to or larger than the minimum size of order specified in Table 2 in Annex II [of the MiFID Regulation]. For the purposes of determining whether an order is large in scale compared to normal market size, all shares admitted to trading on a regulated market shall be classified in accordance with their average daily turnover, which shall be calculated in accordance with the procedure set out in Article 33 [of the MiFID Regulation].

[Note: Article 20 of the MiFID Regulation]

Table 2: Orders large in scale compared with normal market size

MAR 5.7.11 EU

Class in terms of average daily turnover (ADT)

ADT< €500 000

€500 000 ≤ ADT < €1 000 000

€1 000 000 ≤ ADT < €25 000 000

€25 000 000≤ ADT < €50 000 000

ADT ≥ €50 000 000

Minimum size of order qualifying as large in scale compared with normal market size

€50 000

€100 000

€250 000

€400 000

€500 000

[Note: Table 2, Annex II of the MiFID Regulation]

MAR 5.7.12 G

The FCA will publish on its website the calculations and estimates for shares admitted to trading on a regulated market, made by the FCA under the provisions in Articles 33 and 34 of the MiFID Regulation.