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Reviewing MiFID II and the Systematic Internaliser regime

Thomas Kennedy
Head of Analytic Services

MiFID II is posing plenty of challenges for firms on both sides of the Systematic Internaliser regime. Our whitepaper considers the new trading landscape, including the demands of reporting RTS 27 and 28 best execution.


  1. Our whitepaper on MiFID II and the Systematic Internaliser regime looks at how the trading landscape is evolving under the new EU-wide rules.
  2. The report considers challenges on both sides of the Systematic Internaliser regime, and finds out from SI users about their range of execution choices.
  3. Data capture for reporting under RTS27 and 28 best execution regulation is seen as a large mountain to climb for many firms.

The 1 September 2018 deadline for implementation of the Systematic Internaliser (SI) regime under MiFID II marked the beginning of a new EU-wide liquidity landscape.

Firms on both sides of the SI equation — those who are registered as operators of SIs and those on the buy- and sell-sides who may find themselves counterparty to an SI — are just now beginning to grapple with the implications of this new regime.

The full impact is unclear but navigating these waters in the coming months will be challenging for all concerned.

The new trading landscape

SIs are fighting for attention, market share and liquidity with recognized trading venues.

These include regulated markets (RMs), multilateral trading facilities (MTFs) and organized trading facilities (OTFs), as well as specialist execution facilities like periodic auctions and other lesser-known trading approaches.

To understand how the implementation is going we recently commissioned a survey with the A-Team Group covering both sides of the market — executives at registered SIs and firms who expect to trade with them.

The resulting whitepaper looks at the current state of play as the new SI rules take effect, offering insight into how this trading landscape is evolving.

It also explores some of the issues and challenges faced by firms:

  • How are users of SIs viewing the range of execution choices on offer, including RMs, MTFs, OTFs, SIs, periodic auctions, and others.
  • How are SI operators and users investing to operate in this new ecosystem.
  • How are they thinking strategically about SI engagement, both now and in the medium term.

Download the whitepaper for industry views on the SI implementation.

MiFID II and a new approach

While MiFID II makes it clear that SIs are of importance to the EU’s liquidity landscape, this whitepaper unearths market players’ concerns about the functionality and longevity of SIs, and how they are addressing those concerns.

It is early days for MiFID II — and particularly the SI regime. The interviews with key industry executives indicate that the European trading landscape’s tectonic plates are definitely shifting.

Where they will ultimately settle is still open to speculation, but one thing is clear: those changes are far from over.

What is the Systematic Internaliser regime?

MiFID II defines an SI as a firm that deals on its own account by executing client orders on instruments outside the scope of regulated markets or MTFs and does so on ‘an organized, frequent, and systematic basis’.

In essence, an SI matches client orders against its own books.

Under MiFID I, which originally introduced the concept, relatively few entities registered as SIs.

At the time, back in 2008, SIs were only authorized for equities.

MiFID II opened up SIs to handle equity-like instruments, such as depositary receipts, certificates and exchange-traded funds, as well as non-equity instruments such as bonds, derivatives, emission allowances and structured finance products.

However, the publication of data for exchange-traded commodities (ETCs), exchange-traded notes (ETNs), structured finance products (SFPs), securitized derivatives, emission allowances and derivatives has been postponed to 1 February 2019.

As a result, SIs will be required to comply with those obligations from 1 March 2019.

Find out how we can solve your RTS 27 reporting challenge.

Trade and transaction reporting

Firms that become SIs are subject to MiFID II obligations covering (in most cases) pre-trade transparency, best execution, and — crucially — trade and transaction reporting.

See how we can support your RTS 27 reporting challenge

On 1 August 2018, the European Securities and Markets Authority (ESMA) published the equities and bonds thresholds on the total number and volume of transactions executed in EU markets for the first time, covering the period from 3 January 2018 to 30 June 2018.

On 1 September 2018, firms had to register as an SI based on their assessment of whether they met or exceeded the thresholds that determine their SI status.

Subsequent assessments must be made on a quarterly basis, following ESMA publication of SI denominator data on the first calendar day of February, May, August and November.

Listen to the RTS 27 Reports and SI Determination - Managing the challenges webinar.

Best execution compliance

Under the SI regime, best execution compliance requires significant spending to implement.

Almost all SIs interviewed said that implementing the technology infrastructure for best execution as an SI was a key challenge.

One big area to watch will be the challenge of reporting under RTS 27 and 28 for the best execution regulations.

Lining up the technology and the real-time data for this reporting has proven to be a particularly large mountain to climb for some firms. As one executive said, “these were big, onerous projects.”

Real-time data help

We are ideally positioned to support your best execution needs as a market leader in market and reference data, along with world class leading best execution solutions.

With our RTS 27 best execution reporting service we can show you the way.

Learn how we can help you thrive in a MiFID II world