ESMA Delays SI Implementation for Derivatives by Six Months

Blog entry

ESMA has pushed back the systematic internaliser (SI) implementation dates for derivatives by six months due to concerns over a lack of data completeness among market participants. The delay – to March 1, 2019 – mirrors the earlier treatment of MiFID II derivatives rules on open access, which were deferred from January 2018 to January 2020 by regulators in France, Germany and the UK following representations from some of the world’s biggest exchanges.

The new schedule for SI regime calculations and publications, announced today by ESMA, postpones the publication date for information on for exchange-traded commodities, exchange-traded notes, securities futures products, securitised derivatives, emission allowances and derivatives to February 1, 2019, covering the period from July 1 to December 31, 2018. SIs will have to comply with obligations by March 1 – a delay of six months from the original deadline of September 1, 2018.

For equity-like and bond instruments the current schedule remains the same. ESMA will publish information on the total number and the volume of transactions executed in the EU for the first time by August 1, 2018, covering the period from January 3 to 30 June, 2018. Investment firms will have to undertake their first assessment and, where necessary, comply with SI obligations by September 1, 2018.

ESMA will only publish results if trading venues have submitted data for at least 95% of all trading days and if the quality of data is considered to be “sufficient.” Following the initial publication, data will be published on a quarterly basis in respect of a rolling six months assessment period. Investment firms are expected to self-assess and, should they exceed the relative thresholds, comply with the relevant SI-specific obligations within a reduced two-week period.

“For the SI calculations, having a high level of completeness in the reported information is crucial,” warned the regulator.

ESMA originally decided to compute the total volume and number of transactions executed in the EU in order to assist market participants, as that data is essential for the operation of the SI regime and is not otherwise easily available. However, according to today’s announcement, data completeness for the various asset classes had not reached adequate levels when ESMA conducted its first completeness check of the data available in the system for the period January 3 to June 1, 2018.

“Based on this work, ESMA has liaised with NCAs and trading venues to increase the completeness rate as quickly as possible,” said the regulator.