ESMA delays systematic internaliser regime for derivatives

SI calculations for derivatives will now be published on 1 February 2019 as ESMA blames incomplete and insufficient data.

The EU markets watchdog has decided to delay the implementation of the systematic internaliser (SI) regime for derivatives to 2019.

An update from the European Securities and Markets Authority (ESMA) outlined that SI calculations for derivatives will be published on 1 February 2019 rather than 1 August this year, as originally planned.

EU-wide data published on derivatives will cover the period from 1 July 2018 to 31 December 2018, and firms considered to be SIs will have to comply with the requirements from 1 March 2019.

The SI regime under MiFID II requires investment firms to assess whether they are SIs for various assets on a quarterly basis, based on data from the prior six months of activity. If firms exceed thresholds from the calculations, they will be considered an SI under MiFID II and will have to fulfil SI obligations.  

ESMA stated the delay was due to incomplete and inadequate data that had not yet reached a level where ESMA can conduct a complete analysis.

“Given the complexity and size of the task, ESMA then decided to focus on improving completeness for a select number of asset classes while postponing the publication for others,” the EU regulator said in a statement.

ESMA added that data will only be published if trading venues have submitted data for at least 95% of all trading days and if the data is considered sufficient.

SI calculations for equity, equity-like and bond instruments will be published as originally planned on 1 August 2018 and firms will have to perform the first assessments and comply with SI obligations by 1 September this year.

The delay applies to exchange-traded commodities (ETCs), exchange-traded notes (ETNs), security futures products (SFPs), securitised derivatives, emission allowances and derivatives.

ESMA was forced to delay the implementation of MiFID II’s dark trading rules just one week after the regulation was implemented for similar reasons. It said data from trading venues since MiFID II went live was insufficient and did not allow for a meaningful calculation of the planned double volumes caps.

The double volumes caps were eventually enforced in March this year, with hundreds of stocks affected by the restrictions.