MiFID II will significantly increase the regulation of most types of secondary market trading activities and functions. It will introduce a new multilateral trading venue, known as an Organised Trading Facility (OTF), and extend the bilateral Systematic Internaliser (SI) regime for systematic own account dealing beyond equity instruments to investment firms that trade in OTC bonds, derivatives and equity-like instruments.
The OTF definition is broader than the definition of Regulated Market and Multilateral Trading Facility and was introduced to increase transparency in those bond and derivatives markets supported by inter-dealer brokers. It covers a broad range of brokerage arrangements and will capture voice brokerage deemed to constitute a multilateral system. This will apply where the third-party buying and selling interests interact via the OTF “operator’s” matched principal or agency trading activities.
What is a multilateral venue?
There will be three multilateral venues under MiFID II, as follows:
- A Regulated Market (RM), which is a multilateral system operated by a market operator, which brings together or facilitates the bringing together of multiple third-party buying and selling interests in financial instruments – in the system and in accordance with its non-discretionary rules – in a way that results in a contract, for financial instruments admitted to trading under its rules and/or systems, and which is authorised and functions regularly and in accordance with Title III of MiFID II. The list of RMs currently includes the London Stock Exchange Main Market, BATS Europe, ICE, NYSE Euronext London and LIFFE.
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Client Alert 2017-166