The Regulation and Directive introduces provisions in different areas:
- Market efficiency and resilience: focusing on areas like business conduct rules, transparency regimes, transaction reporting, record keeping, etc.
- OTC derivatives markets: aiming at completing the EMIR regulation by introducing a classification of liquid products, trading obligation criteria, indirect clearing and STP.
- Competition: focusing on favoring competition and lowering transaction costs with a regime for accessing CCPs and trading venues.
- Market Microstructure: affecting areas like market making, algorithmic trading, order-to-trade ratio, clock synchronizations, direct electronic access.
At the heart of these provisions lie the definition and classification of trading venues in Regulated Markets (RM), Multilateral Trading Facility (MTF), Organized Trading Facility (OTF) and Systematic Internalisers (SI).
Nasdaq has launched a MIFID II implementation program, which aims at efficiently introducing changes to core functionalities for its members and stakeholders. Nasdaq will inform members on the implementation timeline via these web pages in addition to forums like: Derivatives Market Council, Clearing Council and IT-Forums.
For the Nordic Equity Derivatives Markets, the main areas impacted are:
- All listed equity derivatives products are considered liquid and subject to pre-and post-trade transparency requirements (RTS 2).
- The pre-trade transparency regime will result in the introduction of a minimum block trade size expressed in number of contracts in accordance to Pre-trade LIS values in RTS 2 Table 6.3.
- The Voice Trading System operated by the Exchange Broker desk will be subject to pre-trade transparency requirements in accordance to RTS 2 (i.e. full pre-trade transparency for order sizes lower than SSTI and publication of indicative prices for order sizes between SSTI and Pre-trade LIS thresholds)
- Nasdaq will start publishing the aggregate number of orders on each price level in market-by-level data feeds.
Post-Trade Transparency Regimes:
- The trading system will validate and enforce the minimum size on trade reports eligible for deferral in accordance to the post-trade LIS thresholds.
- All the legs of a multi-leg trade report or combination shall be deferred if at least one of the legs is eligible for deferral
Nasdaq will introduce Circuit Breaker for index futures (H2 2016) and automatic suspension of trading on stock derivative classes in conjunction with circuit breaker/trading suspensions triggered on the underlying instrument.
Nasdaq already operates central price collars (during continuous trading only) and maximum order volume checks for exchange-traded equity derivatives, but a number of adoptions will be required to comply with the new rules including:
- two-sided price limits;
- price limits validation of resting orders;
- price limits during call auctions;
- new maximum order value limit; and
- use of theoretical reference prices.
Market Making Programs
- Members will need to enter into market making agreements if they act according to MiFID II market making definition.
- Specific incentives will be introduced for stressed market conditions.
- Nasdaq will communicate the existence of a stressed market condition via existing accessible channels.
- Publication of terms of market making agreement on the web sites (including list of market makers)
Order-to-Trade Ratio (OTR)
- A regime to monitor OTR will be be introduced for the Nordic Equity Derivatives market, including sanctions in case of violations.
- Identification of algorithms and flagging of transactions conducted by algorithms.
- Nasdaq will provide the execution quality reports required by MiFID II.
Services for OTC Trading and Systematic Internalisers (SI)
- Nasdaq will offer publication services for meeting obligations to disclose all OTC lookalike trades through an APA; and SI quotes below SSTI threshold. Learn more about our OTC Trade Publication (APA) solution
Nasdaq preliminary intention is to implement part of the MiFID II scope already in the second half of 2016 by focusing on the introduction of circuit breaker functionality for the index futures and various enhancements to the current pre-trade controls.
Updates will be published on this site and will contain news on service offerings and MiFID II/MiFIR implementation details as they become available. Members are encouraged to reach out to their Key Account Managers directly with any questions or concerns regarding MiFID II. You may also contact the Nasdaq implementation project directly, via equityderivatives.MiFID2@nasdaq.com