1. (1)

   For determining financial instruments or classes of financial instruments for which there is not a liquid market for the purposes of Article 6 and point (b) of paragraph 1 of Article 8, the following methodologies shall be applied across asset classes:

   1. (a)

      Static determination of liquidity for:

      1. (i)

         the asset class of securitised derivatives as defined in Table 4.1 of Annex III;

      2. (ii)

         the following sub-asset classes of equity derivatives: stock index options, stock index futures/forwards, stock options, stock futures/forwards, stock dividend options, stock dividend futures/forwards, dividend index options, dividend index futures/forwards, volatility index options, volatility index futures/forwards, ETF options, ETF futures/forwards and other equity derivatives as defined in Table 6.1 of Annex III;

      3. (iii)

         the asset class of foreign exchange derivatives as defined in Table 8.1 of Annex III;

      4. (iv)

         the sub-asset classes of other interest rate derivatives, other commodity derivatives, other credit derivatives, other C10 derivatives, other contracts for difference (CFDs), other emission allowances and other emission allowance derivatives as defined in Tables 5.1, 7.1, 9.1, 10.1, 11.1, 12.1 and 13.1 of Annex III.

   2. (b)

      Periodic assessment based on quantitative and, where applicable, qualitative liquidity criteria for:

      1. (i)

         all bond types except ETCs and ETNs as defined in Table 2.1 of Annex III and as further specified in Article 17(1);

      2. (ii)

         ETC and ETN bond types as defined in Table 2.4 of Annex III;

      3. (iii)

         the asset-class of interest rate derivatives except the sub-asset class of other interest rate derivatives as defined in Table 5.1of Annex III;

      4. (iv)

         the following sub-asset classes of equity derivatives: swaps and portfolio swaps as defined in Table 6.1 of Annex III;

      5. (v)

         the asset-class of commodity derivatives except the sub-asset class of other commodity derivatives as defined in Table 7.1 of Annex III;

      6. (vi)

         the following sub-asset classes of credit derivatives: index credit default swaps and single name credit default swaps as defined in Table 9.1 of Annex III;

      7. (vii)

         the asset-class of C10 derivatives except the sub-asset class of other C10 derivatives as defined in Table 10.1 of Annex III;

      8. (viii)

         the following sub-asset classes of contracts for difference (CFDs): currency CFDs and commodity CFDs as defined in Table 11.1 of Annex III;

      9. (ix)

         the asset-class of emission allowances except the sub-asset class of other emission allowances as defined in Table 12.1 of Annex III;

      10. (x)

          the asset-class of emission allowance derivatives except the sub-asset class of other emission allowance derivatives as defined in Table 13.1 of Annex III.

   3. (c)

      Periodic assessment based on qualitative liquidity criteria for:

      1. (i)

         the following sub-asset classes of credit derivatives: CDS index options and single name CDS options as defined in Table 9.1 of Annex III;

      2. (ii)

         the following sub-asset classes of contracts for difference (CFDs): equity CFDs, bond CFDs, CFDs on an equity future/forward and CFDs on an equity option as defined in Table 11.1 of Annex III.

   4. (d)

      Periodic assessment based on a two tests methodology for structured finance products as defined in Table 3.1 of Annex III.

2. (2)

   For determining the size specific to the financial instrument referred to in Article 5 and the orders that are large in scale compared with normal market size referred to in Article 3, the following methodologies shall be applied:

   1. (a)

      the threshold value for:

      1. (i)

         ETC and ETN bond types as defined in Table 2.5 of Annex III;

      2. (ii)

         the asset class of securitised derivatives as defined in Table 4.2 of Annex III;

      3. (iii)

         each sub-class of equity derivatives as defined in Tables 6.2 and 6.3 of Annex III;

      4. (iv)

         each sub-class of foreign exchange derivatives as defined in Table 8.2 of Annex III;

      5. (v)

         each sub-class considered not to have a liquid market for the asset classes of interest rate derivatives, commodity derivatives, credit derivatives, C10 derivatives and contracts for difference (CFDs) as defined in Tables 5.3, 7.3, 9.3, 10.3 and 11.3 of Annex III;

      6. (vi)

         each sub-asset class considered not to have a liquid market for the asset classes of emission allowances and emission allowance derivatives as defined in Tables 12.3 and 13.3 of Annex III;

      7. (vii)

         each structured finance product where Test-1 under paragraph 1(d) is not passed as defined in Table 3.2 of Annex III;

      8. (viii)

         each structured finance product considered not to have a liquid market where only Test-1 under paragraph 1(d) is passed as defined in Table 3.3 of Annex III.

   2. (b)

      the greater of the trade size below which lies the percentage of the transactions corresponding to the trade percentile as further specified in Article 17(3) and the threshold floor for:

      1. (i)

         each bond type, except ETCs and ETNs, as defined in Table 2.3 of Annex III;

      2. (ii)

         each sub-class having a liquid market for the asset classes of interest rate derivatives, commodity derivatives, credit derivatives, C10 derivatives and CFDs as defined in Tables 5.2, 7.2, 9.2, 10.2 and 11.2 of Annex III;

      3. (iii)

         each sub-asset class having a liquid market for the asset classes of emission allowances and emission allowance derivatives as defined in Tables 12.2 and 13.2 of Annex III;

      4. (iv)

         each structured finance product considered to have a liquid market where Test-1 and Test-2 under paragraph 1(d) are passed as defined in Table 3.3 of Annex III.

3. (3)

   For the determination of the size specific to the financial instrument referred to in Article 8(1)(c) and transactions that are large in scale compared with normal market size referred to in Article 8(1)(a), the following methodologies shall be applied:

   1. (a)

      the threshold value for:

      1. (i)

         ETC and ETN bond types as defined in Table 2.5 of Annex III;

      2. (ii)

         the asset class of securitised derivatives as defined in Table 4.2 of Annex III;

      3. (iii)

         each sub-class of equity derivatives as defined in Tables 6.2 and 6.3 of Annex III;

      4. (iv)

         each sub-class of foreign exchange derivatives as defined in Table 8.2 of Annex III;

      5. (v)

         each sub-class considered not to have a liquid market for the asset classes of interest rate derivatives, commodity derivatives, credit derivatives, C10 derivatives and contracts for difference (CFDs) as defined in Tables 5.3, 7.3, 9.3, 10.3 and 11.3 of Annex III;

      6. (vi)

         each sub-asset class considered not to have a liquid market for the asset class of emission allowances and emission allowance derivatives as defined in Tables 12.3 and 13.3 of Annex III;

      7. (vii)

         each structured finance product where Test-1 under paragraph 1(d) is not passed as defined in Table 3.2 of Annex III;

      8. (viii)

         each structured finance product considered not to have a liquid market where only Test-1 under paragraph 1(d) is passed as defined in Table 3.3 of Annex III.

   2. (b)

      the trade size below which lies the percentage of the transactions corresponding to the trade percentile for each bond type, except ETCs and ETNs, as defined in Table 2.3 of Annex III;

   3. (c)

      the greatest of the trade size below which lies the percentage of the transactions corresponding to the trade percentile, the trade size below which lies the percentage of volume corresponding to the volume percentile and the threshold floor for each sub-class considered to have a liquid market for the asset classes of interest rate derivatives, commodity derivatives, credit derivatives, C10 derivatives and CFDs as provided in Tables 5.2, 7.2, 9.2, 10.2 and 11.2 of Annex III;

   4. (d)

      the greater of the trade size below which lies the percentage of the transactions corresponding to the trade percentile and the threshold floor for:

      1. (i)

         each sub-asset class considered to have a liquid market for the asset classes of emission allowances and emission allowance derivatives as provided in Tables 12.2 and 13.2 of Annex III;

      2. (ii)

         each structured finance product considered to have a liquid market where the Test-1 and Test-2 under paragraph 1(d) are passed as defined in Table 3.3 of Annex III.

4. (4)

   For the purpose of paragraph 3(c) where the trade size corresponding to the volume percentile for the determination of the transaction that is large in scale compared with normal market size is higher than the 97,5 trade percentile, the trade volume shall not be taken into consideration and the size specific to the financial instrument referred to in Article 8(1)(c) and the size of transactions large in scale compared with normal market size referred to in Article 8(1)(a) shall be determined as the greater of the trade size below which lies the percentage of the transactions corresponding to the trade percentile and the threshold floor.

5. (5)

   In accordance with Delegated Regulations (EU) 2017/590 and (EU) 2017/577 the FCA shall collect on a daily basis the data from trading venues, APAs and CTPs which is necessary to perform the calculations to determine:

   1. (a)

      the financial instruments and classes of financial instruments not having a liquid market as set out in paragraph 1;

   2. (b)

      the sizes large in scale compared to normal market size and the size specific to the instrument as set out in paragraphs 2 and 3.

6. (7)

   For the purpose of paragraph 1(b) and (d), paragraph 2(b) and paragraph 3(b), (c) and (d), the FCA shall take into account transactions executed in the relevant area between 1 January and 31 December of the preceding year.

7. (8)

   The trade size for the purpose of paragraph 2(b) and paragraph 3(b), (c) and (d) shall be determined according to the measure of volume as defined in Table 4 of Annex II. Where the trade size defined for the purpose of paragraphs 2 and 3 is expressed in monetary value and the financial instrument is not denominated in euros, the trade size shall be converted to the currency in which that financial instrument is denominated by applying the European Central Bank euro foreign exchange reference rate as of 31 December of the preceding year.

8. (9)

   Market operators and investment firms operating a trading venue may convert the trade sizes determined according to paragraphs 2 and 3 to the corresponding number of lots as defined in advance by that trading venue for the respective sub-class or sub-asset class. Market operators and investment firms operating a trading venue may maintain such trade sizes until application of the results of the next calculations performed in accordance to paragraph 17.

9. (10)

   The calculations referred to in paragraph 2(b)(i) and paragraph 3(b) shall exclude transactions with a size equal to or smaller than EUR 100000.

10. (11)

    For the purpose of the determinations referred to in paragraphs 2 and 3, points (b) of paragraph 2 and points (b), (c) and (d) of paragraph 3 shall not apply whenever the number of transactions considered for calculations is smaller than 1000, in which case the following thresholds shall be applied:

    1. (a)

       EUR 100000 for all bond types except ETCs and ETNs;

    2. (b)

       the threshold values defined in paragraph 2(a) and paragraph 3(a) for all financial instruments not covered in point (a) of this paragraph.

11. (12)

    Except when they refer to emission allowances or derivatives thereof, the calculations referred to in paragraph 2(b) and paragraph 3(b), (c) and (d) shall be rounded up to the next:

    1. (a)

       100000 where the threshold value is smaller than 1 million;

    2. (b)

       500000 where the threshold value is equal to or greater than 1 million but smaller than 10 million;

    3. (c)

       5 million where the threshold value is equal to or greater than 10 million but smaller than 100 million;

    4. (d)

       25 million where the threshold value is equal to or greater than 100 million.

12. (13)

    For the purpose of paragraph 1, the quantitative liquidity criteria specified for each asset class in Annex III shall be determined according to Section 1 of Annex III.

13. (14)

    For equity derivatives that are admitted to trading or first traded on a trading venue, that do not belong to a sub-class for which the size specific to the financial instrument referred to in Article 5 and Article 8(1)(c) and the size of orders and transactions large in scale compared with normal market size referred to in Article 3 and Article 8(1)(a) have been published and which belong to one of the sub-asset classes specified in paragraph 1(a)(ii), the size specific to the financial instrument and the size of orders and transactions large in scale compared with normal market size shall be those applicable to the smallest average daily notional amount (ADNA) band of the sub-asset class to which the equity derivative belongs.

14. (15)

    Financial instruments admitted to trading or first traded on a trading venue which do not belong to any sub-class for which the size specific to the financial instrument referred to in Article 5 and Article 8(1)(c) and the size of orders and transactions large in scale compared with normal market size referred to in Article 3 and Article 8(1)(a) have been published shall be considered not to have a liquid market until application of the results of the calculations performed in accordance to paragraph 17. The applicable size specific to the financial instrument referred to in Articles 5 and Article 8(1)(c) and the size of orders and transactions large in scale compared with normal market size referred to in Article 3 and Article 8(1)(a) shall be those of the sub-classes determined not to have a liquid market belonging to the same sub-asset class.

15. (16)

    After the end of the trading day but before the end of that day, trading venues shall submit to the FCA the details included in Annex IV for performing the calculations referred to in paragraph 5 whenever the financial instrument is admitted to trading or first traded on that trading venue or whenever the details previously provided have changed.

16. (17)

    The FCA shall ensure the publication of the results of the calculations referred to under paragraph 5 for each financial instrument and class of financial instrument by 30 April of the year following the date of application of Regulation (EU) No 600/2014 and by 30 April of each year thereafter. The results of the calculations shall apply from 1 June each year following publication.

17. (18)

    For the purposes of the calculations in paragraph 1(b)(i) and by way of derogation from paragraphs 7, 15 and 17, the FCA shall, in respect of bonds except ETCs and ETNs, ensure the publication of the calculations referred to under paragraph 5(a) on a quarterly basis, on the first day of February, May, August and November following the date of application of Regulation (EU) No 600/2014 and on the first day of February, May, August and November each year thereafter. The calculations shall include transactions executed in the relevant area during the preceding calendar quarter and shall apply for the 3 month period beginning on the sixteenth day of February, May, August and November each year.

18. (19)

    Bonds, except for ETCs and ETNs, that are admitted to trading or first traded on a trading venue during the first two months of a quarter shall be considered to have a liquid market as specified in Table 2.2 of Annex III until the application of the results of the calculation of the calendar quarter.

19. (20)

    Bonds, except for ETCs and ETNs, that are admitted to trading or first traded on a trading venue during the last month of a quarter shall be considered to have a liquid market as specified in Table 2.2 of Annex III until the application of the results of the calculation of the following calendar quarter.

1. (1)

   Article 2(1)(62) of Regulation 600/2014/EU does not apply to this Article.

2. (2)

   For the purposes of this Article, the term ‘transitional period’ has the same meaning as under Article 5(3A) of Regulation 600/2014/EU.

3. (3)

   During the transitional period, and until the FCA makes a publication under Article 13 in relation to the financial instrument in question, the determination of whether or not it is liquid, the minimum order and transaction size of the size specific to the financial instrument and the minimum sizes of orders and transactions that are large in scale (as appropriate) in respect of a bond, structured finance product, emission allowance or derivative shall be as follows:

   1. (a)

      that stated in the most recent information published before IP completion day under Article 13 or 18 (whichever is the most recent) by a competent authority in the European Union (including the FCA), provided the calculations used to produce that information did not exclude trading in the UK for the relevant period; or

   2. (b)

      if no such information was published by a competent authority in the European Union in respect of a financial instrument under those provisions before IP completion day:

      1. (i)

         the financial instrument shall be considered not to have a liquid market;

      2. (ii)

         the minimum order and transaction size of the size specific to the financial instrument and the minimum sizes of orders and transactions that are large in scale (as appropriate) shall be that estimated by the FCA, taking into account any previous trading history of that financial instrument and of other financial instruments that are considered to have similar characteristics, and published on IP completion day.

4. (4)

   From IP completion day and during the transitional period the FCA’s obligations to perform calculations and publish information under Articles 13(17) and 13(18) are modified as follows:

   1. (a)

      it shall publish whether or not the relevant instrument appears to it to be liquid, what appears to it to be the minimum order and transaction size of the size specific to the financial instrument, and the minimum sizes of orders and transactions that are large in scale (as appropriate);

   2. (b)

      it is not required to follow the relevant methodology in Article 3, 5, 6, 9, 10, 13 or 17 (as applicable) but where it does not:

      1. - it must have regard to the relevant methodology; and

      2. - it may take into account any information available in relation to trading of the financial instrument in question in the United Kingdom or in any other country; and

   3. (c)

      in the case of a publication under Article 13(17), it shall ensure publication by five working days after 30 April; and

   4. (d)

      in the case of a publication under Article 13(18), it shall ensure publication by five working days after the first day of February, May, August and November.

A transaction shall be considered to be entered into by a member of the European System of Central Banks (ESCB), the central bank of Norway, the central bank of Iceland, the Treasury or the Bank of England in performance of monetary, foreign exchange and financial stability policy where that transaction meets any of the following requirements:

1. (a)

   the transaction is carried out for the purposes of monetary policy;

2. (b)

   the transaction is a foreign-exchange operation;

3. (c)

   the transaction is carried out for the purposes of financial stability policy.

The modification of the references to members of the ESCB made by paragraph 31baz of Annex IX (Financial Services) to the EEA Agreement does not have effect for the purposes of this Article.

Article 1(6) of Regulation (EU) No 600/2014 shall not apply to the following types of transactions entered into by a member of the ESCB, the central bank of Norway, the central bank of Iceland, the Treasury or the Bank of England for the performance of an investment operation that is unconnected with that member's performance of one of the tasks referred to in Article 14:

1. (a)

   transactions entered into for the management of its own funds;

2. (b)

   transactions entered into for administrative purposes or for the staff of the member of the ESCB, the central bank of Norway, the central bank of Iceland, the Treasury or the Bank of England which include transactions conducted in the capacity as administrator of a pension scheme for its staff;

3. (c)

   transactions entered into for its investment portfolio pursuant to obligations under national law.

The modification of the references to members of the ESCB made by paragraph 31baz of Annex IX (Financial Services) to the EEA Agreement does not have effect for the purposes of this Article.

1. (-1)

   This Article does not apply in relation to a temporary suspension of obligations under Article 9(4A) or Article 11(2A) of Regulation (EU) No 600/2014.

2. (1)

   For financial instruments for which there is a liquid market in accordance with the methodology set out in Article 13, the FCA may temporarily suspend the obligations set out in Articles 8 and 10 Regulation (EU) No 600/2014 where for a class of bonds, structured finance products, emission allowances or derivatives, the total volume as defined in Table 4 of Annex II calculated for the previous 30 calendar days represents less than 40 % of the average monthly volume calculated for the 12 full calendar months preceding those 30 calendar days.

3. (2)

   For financial instruments for which there is not a liquid market in accordance with the methodology set out in Article 13, the FCA may temporarily suspend the obligations referred to in Articles 8 and 10 of Regulation (EU) No 600/2014 when for a class of bonds, structured finance products, emission allowances or derivatives, the total volume as defined in Table 4 of Annex II calculated for the previous 30 calendar days represents less than 20 % of the average monthly volume calculated for the 12 full calendar months preceding those 30 calendar days.

4. (3)

   The FCA shall take into account the transactions executed on all venues in the relevant area for the class of bonds, structured finance products, emission allowances or derivatives concerned when performing the calculations referred to in paragraphs 1 and 2. The calculations shall be performed at the level of the class of financial instruments to which the liquidity test set out in Article 13 is applied.

5. (4)

   Before the FCA decides to suspend transparency obligations, they shall ensure that the significant decline in liquidity across all venues is not the result of seasonal effects of the relevant class of financial instruments on liquidity.

1. (1)

   For determining the bonds for which there is not a liquid market for the purposes of Article 6 and according to the methodology specified in Article 13(1)(b), the approach for the liquidity criterion "average daily number of trades" shall be taken applying the "average daily number of trades" corresponding to stage S1 (15 daily trades).

2. (2)

   Corporate bonds and covered bonds that are admitted to trading or first traded on a trading venue shall be considered to have a liquid market until the application of the results of the first quarterly liquidity determination as set out in Article 13(18) where:

   1. (a)

      the issuance size exceeds EUR 1000000000 during stages S1 and S2, as determined in accordance with paragraph 6;

   2. (b)

      the issuance size exceeds EUR 500000000 during stages S3 and S4, as determined in accordance with paragraph 6.

3. (3)

   For determining the size specific to the financial instrument for the purposes of Article 5 and according to the methodology specified in Article 13(2)(b), the approach for the trade percentile to be applied shall be used applying the trade percentile corresponding to the stage S1 (30th percentile).

4. (4)

   The FCA shall, by 30 July of the year following the date of application of Regulation (EU) No 600/2014 and by 30 July of each year thereafter, submit to the Treasury an assessment of the operation of the thresholds for the liquidity criterion 'average daily number of trades' for bonds as well as the size specific to the financial instruments

5. (5)

   The assessment referred to in paragraph 4 shall take into account:

   1. (a)

      the evolution of trading volumes in non-equity instruments covered by the pre-trade transparency obligations pursuant to Article 8 and 9 of Regulation (EU) No 600/2014;

   2. (b)

      the impact on liquidity providers of the percentile thresholds used to determine the size specific to the financial instrument; and

   3. (c)

      any other relevant factors.

6. (6)

   The FCA shall, in light of the assessment undertaken in accordance with paragraphs 4 and 5, consider its use of the powers to amend this Regulation at regulation 3 of the Financial Regulators' Powers (Technical Standards etc.) (Amendment etc.) (EU Exit) Regulations 2018 (SI 2018/1115) and section 138P of FSMA.

1. (1)

   Competent authorities shall, no later than six months prior to the date of application of Regulation (EU) No 600/2014, collect the necessary data, calculate and ensure publication of the details referred to in Article 13(5).

2. (2)

   For the purposes of paragraph 1:

   1. (a)

      the calculations shall be based on a six-month reference period commencing 18 months prior to the date of application of Regulation (EU) No 600/2014;

   2. (b)

      the results of the calculations contained in the first publication shall be used until the results of the first regular calculations set out in Article 13(17) apply.

3. (3)

   By derogation from paragraph 1, for all bonds, except ETCs and ETNs, competent authorities shall use their best endeavours to ensure publication of the results of the transparency calculations specified in paragraph 1(b)(i) of Article 13 no later than on the first day of the month preceding the date of application of Regulation (EU) No 600/2014, based on a reference period of three months commencing on the first day of the fifth month preceding the date of application of Regulation (EU) No 600/2014.

4. (4)

   Competent authorities, market operators and investment firms including investment firms operating a trading venue shall use the information published in accordance with paragraph 3 until the results of the first regular calculation set out in Article 13(18) apply.

5. (5)

   Bonds, except for ETCs and ETNs, which are admitted to trading or first traded on a trading venue in the three month period preceding the date of application of Regulation (EU) No 600/2014 shall be considered not to have a liquid market as set out in Table 2.2 of Annex III until the results of the first regular calculation set out in Article 13(18) apply.

This Regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.

It shall apply from 3 January 2018. However, Article 18 shall apply from the date of the entry of force of this Regulation.