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EU EU Legislative material

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MAR 5.1 Application1

[Note: ESMA has also issued guidelines under article 16(3) of the ESMA Regulation covering various topics relating to automated trading and direct electronic access.

See http://www.fsa.gov.uk/static/pubs/other/esma-guidelines.pdf]

MAR 5.1.1R01/11/2007

1This chapter applies to:

(1)	a UK domestic firm which operates an MTF from an establishment in the United Kingdom or elsewhere; or
(2)	an overseas firm which operates an MTF from an establishment in the United Kingdom.

MAR 5.1.2R01/11/2007

In this chapter, provisions marked "EU" apply to an overseas firm as if they were rules.1

MAR 5.2 Purpose1

MAR 5.2.1 G 01/11/2007

1The purpose of this chapter is to implement the provisions of MiFID relating to firms operating MTFs, specifically articles 14, 26, 29 and 30 of MiFID. This chapter does not apply to bilateral systems, which are excluded from the MTF definition. It sets out for reference other provisions of the MiFID Regulation relevant to the articles being implemented.

MAR 5.3 Trading process requirements1

MAR 5.3.1 R 01/11/2007

1A firm operating an MTF must have:

(1)
transparentand non-discretionary rules and procedures for fair and orderly trading;
[Note:
Article 14(1)
of MiFID]
(2)
objective criteria for the efficient execution of orders;
[Note: Article 14(1) of MiFID]
(3)
transparent rules regarding the criteria for determining the financial instruments that can be traded under its systems;
[Note: Subparagraph 1 of Article 14(2) of MiFID]
(4)
transparent rules, based on objective criteria, governing access to its facility, which rules must provide that its members or participants are investment firms, BCD credit institutions or other persons who:
1. (a)
  are fit and proper;
2. (b)
  have a sufficient level of trading ability and competence;
3. (c)
  where applicable, have adequate organisational arrangements;
4. (d)
  have sufficient resources for the role they are to perform, taking into account the different financial arrangements that the firm operating the MTF may have established in order to guarantee the adequate settlement of transactions;and
[Note: Article 14(4) and 42(3) of MiFID]
(5)
where applicable must provide, or be satisfied that there is access to, sufficient publicly available information to enable its users to form an investment judgment, taking into account both the nature of the users and the types of instrument traded.
[Note: Subparagraph 2 of Article 14(2) of MiFID]

Publication of pre and post-trade information for shares not admitted to trading on a regulated market

MAR 5.3.2 G 01/11/2007

1In the case of shares not admitted to trading on a regulated market, the FSA expects that in order to fulfil the requirements in MAR 5.3.1 R as regards fair and orderly trading, the firm operating the MTF will make public on reasonable commercial terms:

(1)
on a continuous basis during normal trading hours, information about the quotes and orders relating to these shares which the MTF displays or advertises to its users; and
(2)
as close to real time as possible, information about the price, volume and time of transactions in these shares executed under its systems.

MAR 5.3.3 G 01/11/2007

1The firm may make information about a large quote, order or transaction available under MAR 5.3.2 G on a delayed basis, but only to the extent reasonably necessary to protect the interests of the relevant user who placed the order, provided the quote or executed the transaction.

Publication of post-trade information for financial instruments other than shares1

MAR 5.3.4 G 01/11/2007

1Where financial instruments other than shares are traded on an MTF, and the same or substantially similar instruments are also traded on a UK RIE, a regulated market or an EEA commodities market, the FSA expects that in order to fulfil the requirements in MAR 5.3.1 R as regards fair and orderly trading, the firm operating the MTF will make public, on reasonable commercial terms and as close to real time as possible, the price, volume and time of the transactions executed under its systems.

MAR 5.3.5 G 01/11/2007

1For large transactions in debt securities, an indication that volume exceeded a certain figure (not being less than £7 million or its equivalent) instead of the actual volume is sufficient transparency of the volume of a trade.

MAR 5.3.6 G 01/11/2007

1The firm may make information about a large quote, order or transaction available under MAR 5.3.4 G on a delayed basis, but only to the extent reasonably necessary to protect the interests of the relevant user who placed the order, provided the quote or executed the transaction.

Operation of a primary market in shares not admitted to trading on a regulated market

MAR 5.3.7 G 01/11/2007

1The FSA will be minded to impose a variation on the Part IV permission of an MTF operator that operates a primary market in shares not admitted to trading on a regulated market in order to ensure its fulfilment of the requirements in MAR 5.3.1 R as regards fair and orderly trading.

Transferable securities traded without issuer consent

MAR 5.3.8 R 01/11/2007

1Where a transferable security, which has been admitted to trading on a regulated market, is also traded on an MTF without the consent of the issuer, the firm operating the MTF must not make the issuer subject to any obligation relating to initial, ongoing or ad hoc financial disclosure with regard to that MTF.

[Note: Article 14(6) of MiFID]

MAR 5.4 Finalisation of transactions1

MAR 5.4.1 R 01/11/2007

1A firm operating an MTF must:

(1)
clearly inform its users of their respective responsibilities for the settlement of transactions executed in that MTF; and
(2)
have in place the arrangements necessary to facilitate the efficient settlement of the transactions concluded under its systems.

[Note: Article 14(5) of MiFID]

MAR 5.5 Monitoring compliance with the rules of the MTF6

MAR 5.5.1 R 01/11/2007

6A firm operating an MTF must:

(1)
have effective arrangements and procedures, relevant to the MTF, for the regular monitoring of the compliance by its users with its rules; and
(2)
monitor the transactions undertaken by its users under its systems in order to identify breaches of those rules, disorderly trading conditions or conduct that may involve market abuse.

[Note: Article 26(1) of MiFID]

MAR 5.6 Reporting requirements

MAR 5.6.1 R 01/11/2007

1A firm operating an MTF must:

(1)
report to the FSA:
1. (a)
  significant breaches of the firm's rules;
2. (b)
  disorderly trading conditions; and
3. (c)
  conduct that may involve market abuse;
(2)
supply the information required under this rule without delay to the FSA and any other authority competent for the investigation and prosecution of market abuse; and
(3)
provide full assistance to the FSA, and any other authority competent for the investigation and prosecution of market abuse, in its investigation and prosecution of market abuse occurring on or through the firm's systems.

[Note:

Article 26(2) of MiFID]

MAR 5.7 Pre-trade transparency requirements for shares

MAR 5.7.1 R 06/10/2009

(1)
1Unless (2),(3) or (4) applies,2 in respect of shares admitted to trading on a regulated market, a firm operating an MTF must make public, on reasonable commercial terms and on a continuous basis during normal trading hours:
1. (a)
  the current bid and offer prices which are advertised through its systems; and2
2. (b)
  the depth of trading interests at those prices.2

[Note: Article 29(1) of MiFID]

(2)
Paragraph (1) does not apply to systems operated by an MTF to the extent that those systems satisfy one of the criteria in (a) or (b), subject to (c):2
1. (a)
  they must be based on a trading methodology by which the price is determined in accordance with a reference price generated by another system, where that reference price is widely published and is regarded generally by market participants as a reliable reference price;2
2. (b)
  they formalise negotiated transactions, each of which meets one of 3the criteria in (i) and (ii), subject to the provisions in (iii) and (iv):2
  1. (i)
    it is made at or within the current volume weighted spread reflected on the order book or the quotes of the market makers of the MTF operating that system or, where the share is not traded continuously, within a percentage of a suitable reference price, being a percentage and a reference price set in advance by the system operator;2
  2. (ii)
    it is subject to conditions other than the current market price of the share.2
  3. (iii)
    For the purposes of (b), the other conditions specified in the rules of the MTF for a transaction of this kind must also have been fulfilled.2
  4. (iv)
    Negotiated transaction has the meaning given in Article 19 of the MiFID Regulation.2
  [Note: Article 19 of the MiFID Regulation is reproduced in MAR 5.7.9 EU.]2
3. (c)
  In the case of systems having functionality other than as described in (a) or (b), the disapplication does not apply to that other functionality.2
(3)
Paragraph (1) does not apply in relation to orders held in an order management facility maintained by the MTF pending their being disclosed to the market.2
(4)
1. (a)
  Paragraph (1) does not apply in relation to orders that are large in scale compared to normal market size for the share or type of share in question.2
2. (b)
  An order will be considered to be large in scale if it meets the criteria set out in Article 20 of the MiFID Regulation.2
[Note: Article 20 of the MiFID Regulation is reproduced in MAR 5.7.10 EU.]2

Pre-trade information

MAR 5.7.2 EU 01/11/2007

1.	An investment firm or market operator operating an MTF or a regulated market shall, in respect of each share admitted to trading on a regulated market that is traded within a system operated by it and specified in Table 1 of Annex II [of the MiFID Regulation], make public the information set out in paragraphs 2 to 6.
2.	Where one of the entities referred to in paragraph 1 operates a continuous auction order book trading system, it shall, for each share as specified in paragraph 1, make public continuously throughout its normal trading hours the aggregate number of orders and of the shares those orders represent at each price level, for the five best bid and offer price levels.
3.	Where one of the entities referred to in paragraph 1 operates a quote-driven trading system, it shall, for each share as specified in paragraph 1, make public continuously throughout its normal trading hours the best bid and offer by price of each market maker in that share, together with the volumes attaching to those prices. The quotes made public shall be those that represent binding commitments to buy and sell the shares and which indicate the price and volume of shares in which the registered market makers are prepared to buy or sell. In exceptional market conditions, however, one-way prices may be allowed for a limited time.
4.	Where one of the entities referred to in paragraph 1 operates a periodic auction trading system, it shall, for each share specified in paragraph 1, make public continuously throughout its normal trading hours the price that would best satisfy the system's trading algorithm and the volume that would potentially be executable at that price by participants in that system.
5.	Where one of the entities referred to in paragraph 1 operates a trading system which is not wholly covered by paragraph 2 or 3 or 4, either because it is a hybrid system falling under more than one of those paragraphs or because the price determination process is of a different nature, it shall maintain a standard of pre-trade transparency that ensures that adequate information is made public as to the price level of orders or quotes for each share specified in paragraph 1, as well as the level of trading interest in that share. In particular, the five best bid and offer price levels and/or two-way quotes of each market maker in that share shall be made public, if the characteristics of the price discovery mechanism permit it.
6.	A summary of the information to be made public in accordance with paragraphs 2 to 5 is specified in Table 1 of Annex II [of the MiFID Regulation].
[Note: Article 17 of the MiFID Regulation]

Table 1: Information to be made public in accordance with Article 17

MAR 5.7.3 EU 01/11/2007

Type of system	Description of system	Summary of information to be made public, in accordance with Article 17
Continuous auction order book trading system	A system that by means of an order book and a trading algorithm operated without human intervention matches sell orders with matching buy orders on the basis of the best available price on a continuous basis	The aggregate number of orders and the shares they represent at each price level, for at least the five best bid and offer price levels
Quote-driven trading system	A system where transactions are concluded on the basis of firm quotes that are continuously made available to participants, which requires the market makers to maintain quotes in a size that balances the needs of members and participants to deal in a commercial size and the risk to which the market maker exposes itself	The best bid and offer by price of each market maker in that share, together with the volumes attaching to those prices
Periodic auction trading system	A system that matches orders on the basis of a periodic auction and a trading algorithm operated without human intervention	The price at which the auction trading system would best satisfy its trading algorithm and the volume that would potentially be executable at that price
Trading system not covered by first three rows	A hybrid system falling into two or more of the first three rows or a system where the price determination process is of a different nature than that applicable to the types of system covered by first three rows	Adequate information as to the level of orders or quotes and of trading interest; in particular, the five best bid and offer price levels and/or two-way quotes of each market maker in the share, if the characteristics of the price discovery mechanism so permit
[Note: Table 1, Annex II of the MiFID Regulation]

Publication of pre-trade information

MAR 5.7.4 EU 01/11/2007

1.	A regulated market, MTF or systematic internaliser shall be considered to publish pre-trade information on a continuous basis during normal trading hours if that information is published as soon as it becomes available during the normal trading hours of the regulated market, MTF or systematic internaliser concerned, and remains available until it is updated.
2.	Pre-trade information … shall be made available as close to real time as possible. …
[Note: Article 29(1) and (2) of the MiFID Regulation]

MAR 5.7.5 EU 01/11/2007

Information which is required to be made available as close to real time as possible should be made available as close to instantaneously as technically possible, assuming a reasonable level of efficiency and of expenditure on systems on the part of the person concerned. The information should only be published close to the three minute maximum limit in exceptional cases where the systems available do not allow for a publication in a shorter period of time.

[Note: Recital (18) to the MiFID Regulation]

Disapplication of the pre-trade transparency requirements

MAR 5.7.6 G 01/11/2007

The obligation in MAR 5.7.1 R (1)2to make public certain pre-trade information is disapplied in MAR 5.7.1 R (2)2based on the market model or the type and size of orders in the cases identified in the MiFID Regulation, and as reproduced for reference in MAR 5.7.8 EU, MAR 5.7.9 EU, MAR 5.7.10 EU and MAR 5.7.11 EU. In particular, the obligation is disapplied2 in respect of transactions that are large in scale compared with the normal market size for the share or type of share in question.

[Note: Article 29(2) of MiFID and Recital 12 and Articles 18, 19, 20, 33 and 34 of the MiFID Regulation]

MAR 5.7.7 EU 01/11/2007

If granting waivers in relation to pre-trade transparency requirements, or authorising the deferral of post-trade transparency obligations, competent authorities should treat all regulated markets and MTFs equally and in a non-discriminatory manner, so that a waiver or deferral is granted either to all regulated markets and MTFs that they authorise under [the MiFID] Directive 2004/39/EC, or to none. Competent authorities which grant the waivers or deferrals should not impose additional requirements.

[Note: Recital 12 to the MiFID Regulation]

MAR 5.7.8 EU 06/10/2009

1.	Waivers in accordance with Article 29(2) and 44(2) of [the MiFID] Directive 2004/39/EC may be granted by the competent authorities for systems operated by an MTF or a regulated market, if those systems satisfy one of the following criteria:
	(a)	they must be based on a trading methodology by which the price is determined in accordance with a reference price generated by another system, where that reference price is widely published and is regarded generally by market participants as a reliable reference price;
	(b)	they formalise negotiated transactions, each of which meets one of 3the following criteria:
		(i)	it is made at or within the current volume weighted spread reflected on the order book or the quotes of the market makers of the regulated market or MTF operating that system or, where the share is not traded continuously, within a percentage of a suitable reference price, being a percentage and a reference price set in advance by the system operator;
		(ii)	it is subject to conditions other than the current market price of the share.
	For the purposes of point (b), the other conditions specified in the rules of the regulated market or MTF for a transaction of this kind must also have been fulfilled. In the case of systems having functionality other than as described in points (a) or (b), the waiver shall not apply to that other functionality.
2.	Waivers in accordance with Articles 29(2) and 44(2) of [the MiFID] Directive 2004/39/EC based on the type of orders may be granted only in relation to orders held in an order management facility maintained by the regulated market or the MTF pending their being disclosed to the market.
[Note: Article 18 of the MiFID Regulation]

MAR 5.7.9 EU 01/11/2007

For the purpose of Article 18(1)(b) [of the MiFID Regulation] a negotiated transaction shall mean a transaction involving members or participants of a regulated market or an MTF which is negotiated privately but executed within the regulated market or MTF and where that member or participant in doing so undertakes one of the following tasks:
(a)	dealing on own account with another member or participant who acts for the account of a client;
(b)	dealing with another member or participant, where both are executing orders on own account;
(c)	acting for the account of both the buyer and seller;
(d)	acting for the account of the buyer, where another member or participant acts for the account of the seller;
(e)	trading for own account against a client order.
[Note: Article 19 of the MiFID Regulation]

MAR 5.7.10 EU 01/11/2007

An order shall be considered to be large in scale compared with normal market size if it is equal to or larger than the minimum size of order specified in Table 2 in Annex II [of the MiFID Regulation]. For the purposes of determining whether an order is large in scale compared to normal market size, all shares admitted to trading on a regulated market shall be classified in accordance with their average daily turnover, which shall be calculated in accordance with the procedure set out in Article 33 [of the MiFID Regulation].

[Note: Article 20 of the MiFID Regulation]

Table 2: Orders large in scale compared with normal market size

MAR 5.7.11 EU 01/11/2007

Class in terms of average daily turnover (ADT)	ADT< €500 000	€500 000 ≤ ADT < €1 000 000	€1 000 000 ≤ ADT < €25 000 000	€25 000 000≤ ADT < €50 000 000	ADT ≥ €50 000 000
Minimum size of order qualifying as large in scale compared with normal market size	€50 000	€100 000	€250 000	€400 000	€500 000
[Note: Table 2, Annex II of the MiFID Regulation]

MAR 5.7.12 G 01/11/2007

The FSA will publish on its website the calculations and estimates for shares admitted to trading on a regulated market, made by the FSA under the provisions in Articles 33 and 34 of the MiFID Regulation.

MAR 5.8 Provisions common to pre- and post-trade transparency requirements for shares

MAR 5.8.1 EU 01/11/2007

1For the purposes of Articles 27, 28, 29, 30, 44 and 45 of [the MiFID] Directive 2004/39/EC and of this [MiFID] Regulation, pre- and post-trade information shall be considered to be made public or available to the public if it is made available generally through one of the following to investors located in the Community:
(a)	the facilities of a regulated market or an MTF;
(b)	the facilities of a third party;
(c)	proprietary arrangements.
[Note: Article 30 of the MiFID Regulation]

MAR 5.8.2 EU 01/11/2007

Any arrangement to make information public, adopted for the purposes of Articles 30 and 31 [of the MiFID Regulation], shall satisfy the following conditions:
(a)	it must include all reasonable steps necessary to ensure that the information to be published is reliable, monitored continuously for errors, and corrected as soon as errors are detected;
(b)	it must facilitate the consolidation of the data with similar data from other sources;
(c)	it must make the information available to the public on a non-discriminatory commercial basis at a reasonable cost.
[Note: Article 32 of the MiFID Regulation]

MAR 5.8.3 G 01/11/2007

2The FSA considers that for the purposes of ensuring that published information is reliable, monitored continuously for errors, and corrected as soon as errors are detected (see MAR 5.8.2 EU(a)), a verification process should be established which does not need to be external from the organisation of the publishing entity, but which should be an independent cross-check of the accuracy of the information generated by the trading process. This process should have the capability to at least identify price and volume anomalies, be systematic and conducted in real-time. The chosen process should be reasonable and proportionate in relation to the business.

MAR 5.8.4 G 01/11/2007

(1)
2In respect of arrangements facilitating the consolidation of data as required in MAR 5.8.2 EU(b), the FSA considers information as being made public in accordance with MAR 5.8.2 EU(b), if it:
1. (a)
  is accessible by automated electronic means in a machine-readable way;
2. (b)
  utilises technology that facilitates consolidation of the data and permits commercially viable usage; and
3. (c)
  is accompanied by instructions outlining how users can access the information.
(2)
The FSA considers that an arrangement fulfils the 'machine-readable' criteria where the data
1. (a)
  is in a physical form that is designed to be read by a computer;
2. (b)
  is in a location on a computer storage device where that location is known in advance by the party wishing to access the data; and
3. (c)
  is in a format that is known in advance by the party wishing to access the data.
(3)
The FSA considers that publication on a non-machine-readable website would not meet the MiFID requirements.
(4)
The FSA considers that information that is made public in accordance with MAR 5.8.2 EU should conform to a consistent and structured format based on industry standards. Firms operating an MTF can choose the structure that they use.

MAR 5.9 Post-trade transparency requirements for shares

MAR 5.9.1 R 01/11/2007

(1)
1In respect of shares admitted to trading on a regulated market, unless MAR 5.9.1 R (2) applies and MAR 5.9.7 R is satisfied2, a firm operating an MTF must make public, on reasonable commercial terms and as close to real-time as possible, the price, volume and time of the transactions which are advertised through its systems. This requirement does not apply to the details of a transaction executed on an MTF that is made public under the systems of a regulated market.

[Note: Article 30(1) of MiFID]

(2)
A firm may defer publication of trade information required in (1) for no longer than the period specified in Table 4 in Annex II of the MiFID Regulation for the class of share and transaction concerned, provided that the following criteria in (a) and (b) are satisfied and subject to the provision in (c):2
1. (a)
  the transaction is between an investment firm dealing on own account and a client of that firm;2
2. (b)
  the size of the transaction is equal to or exceeds the relevant minimum qualifying size, as specified in Table 4 in Annex II.2
3. (c)
  In order to determine the relevant minimum qualifying size for the purposes of point (b), all shares admitted to trading on a regulated market must be classified in accordance with their average daily turnover to be calculated in accordance with Article 33 of the MiFID Regulation.2

Note: Table 4 of Annex II of the MiFID Regulation is reproduced in MAR 7 Annex 1 EU.2

MAR 5.9.2 EU 01/11/2007

[Note: Recital 18 to the MiFID Regulation]

Post-trade information

MAR 5.9.3 EU 01/11/2007

1.	Investment firms, regulated markets and investment firms and market operators operating an MTF shall, with regard to transactions in respect of shares admitted to trading on regulated markets concluded by them or, in the case of regulated markets or MTFs, within their systems, make public the following details:
	(a)	the details specified in points 2, 3, 6, 16, 17, 18 and 21 of Table 1 of Annex I [of the MiFID Regulation];
	(b)	an indication that the exchange of shares is determined by factors other than the current market valuation of the share, where applicable;
	(c)	an indication that the trade was a negotiated trade, where applicable;
	(d)	any amendments to previously disclosed information, where applicable.
	Those details shall be made public either by reference to each transaction or in a form aggregating the volume and price of all transactions in the same share taking place at the same price at the same time.
[Note: Article 27(1) of the MiFID Regulation]

Publication of post-trade information

MAR 5.9.4 EU 01/11/2007

2.	… post-trade information relating to transactions taking place on trading venues within normal trading hours, shall be made available as close to real time as possible. Post-trade information relating to such transactions shall be made available in any case within three minutes of the relevant transaction.
3.	Information relating to a portfolio trade shall be made available with respect to each constituent transaction as close to real time as possible, having regard to the need to allocate prices to particular shares. Each constituent transaction shall be assessed separately for the purpose of determining whether deferred publication in respect of that transaction is available under Article 28 [of the MiFID Regulation].
4.	Post-trade information relating to transactions taking place on a trading venue but outside its normal trading hours shall be made public before the opening of the next trading day of the trading venue on which the transaction took place.
[Note: Article 29 (2) to (4) of the MiFID Regulation]

MAR 5.9.5 EU 01/11/2007

1.	… A reference to the opening of the trading day shall be a reference to the commencement of the normal trading hours of the trading venue.…
[Note: Article 4(1) of the MiFID Regulation]

Deferred publication of post-trade information

MAR 5.9.6 EU 01/11/2007

The deferred publication of information in respect of transactions may be authorised, for a period no longer than the period specified in Table 4 in Annex II [of the MiFID Regulation] [reproduced in MAR 7 Annex 1 EU] for the class of share and transaction concerned, provided that the following criteria are satisfied:
(a)	the transaction is between an investment firm dealing on own account and a client of that firm;
(b)	the size of the transaction is equal to or exceeds the relevant minimum qualifying size, as specified in Table 4 in Annex II.
In order to determine the relevant minimum qualifying size for the purposes of point (b), all shares admitted to trading on a regulated market shall be classified in accordance with their average daily turnover to be calculated in accordance with Article 33 [of the MiFID Regulation].
[Note: Article 28 of the MiFID Regulation]

MAR 5.9.6A G 01/11/2007

2The deferred publication of information, referred to in MAR 5.9.6 EU, is authorised by the FSA, to the extent set out in that provision, and, in particular, is given effect in MAR 5.9.1 R (2).

MAR 5.9.7 R 01/11/2007

An MTF must obtain the prior approval of the FSA to proposed arrangements for deferred post-trade publication and must clearly disclose such arrangements to market participants and the investing public.

[Note: Article 30(2) of MiFID]