MAR 6.8 Liquid market for shares, share class, standard market size and relevant market
A systematic internaliser will need to refer to the provisions in MAR 6.8.3 EU, MAR 6.8.4 EU, MAR 6.8.5 EU, MAR 6.8.6 EU and MAR 6.8.7 EU and the material the FSA publishes in relation to those provisions to determine:
- (1)
whether there is a liquid market for a share;
- (2)
the class to which a share should be allocated;
- (3)
the standard market size for each class of shares; and
- (4)
the relevant market for a share.
[Note: Article 27(1), (2) and (7) of MiFID]
The FSA will publish on its website the material referred to in MAR 6.8.1 G as regards liquid market for shares, share class, standard market size and the relevant market for a share.
Shares not traded daily should not be considered as having a liquid market for the purposes of [the MiFID] Directive 2004/39/EC. However, if, for exceptional reasons, trading in a share is suspended for reasons related to the preservation of an orderly market or force majeure and therefore a share is not traded during some trading days, this should not mean that the share cannot be considered to have a liquid market. |
[Note: Recital 16 to the MiFID Regulation] |
1. |
The most relevant market in terms of liquidity for a financial instrument which is admitted to trading on a regulated market, hereinafter "the most relevant market", shall be determined in accordance with paragraphs 2 to 8. |
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2. |
In the case of a share or other transferable security covered by Article 4(1)(18)(a) of [the MiFID] Directive 2004/39/EC or of a unit in a collective investment undertaking, the most relevant market shall be the Member State where the share or the unit was first admitted to trading on a regulated market. ... |
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8. |
Where a financial instrument covered by paragraphs 2 ... was first admitted to trading on more than one regulated market simultaneously, and all those regulated markets share the same home Member State, that Member State shall be the most relevant market. |
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Where the regulated markets concerned do not share the same home Member State, the most relevant market in terms of liquidity for that instrument shall be the market where the turnover of that instrument is highest. |
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For the purposes of determining the most relevant market where the turnover of the instrument is highest, each competent authority that has authorised one of the regulated markets concerned shall calculate the turnover for that instrument in its respective market for the previous calendar year, provided that the instrument was admitted to trading at the beginning of that year. |
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Where the turnover for the relevant financial instrument cannot be calculated by reason of insufficient or non-existent data and the issuer has its registered office in a Member State, the most relevant market shall be the market of the Member State where the registered office of the issuer is situated. |
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However, where the issuer does not have its registered office in a Member State, the most relevant market for that instrument shall be the market where the turnover of the relevant instrument class is the highest. For the purposes of determining that market, each competent authority that has authorised one of the regulated markets concerned shall calculate the turnover of the instruments of the same class in its respective market for the preceding calendar year. |
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The relevant classes of financial instrument are the following: |
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(a) |
shares; ... |
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[Note: Article 9(1),(2) and (8) of the MiFID Regulation] |
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1. |
A share admitted to trading on a regulated market shall be considered to have a liquid market if the share is traded daily, with a free float of less than EUR 500 million, and one of the following conditions is satisfied: |
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(a) |
the average daily number of transactions in the share is not less than 500; |
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(b) |
the average daily turnover for the share is not less that EUR 2 million. |
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However, a Member State may, in respect of shares for which it is the most relevant market, specify by notice that both those conditions are to apply. That notice shall be made public. |
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2. |
A Member State may specify the minimum number of liquid shares for that Member State. The minimum number shall be no greater than five. The specification shall be made public. |
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3. |
Where, pursuant to paragraph 1, a Member State would be the most relevant market for fewer liquid shares than the minimum number specified in accordance with paragraph 2, the competent authority for that Member State may designate one or more additional liquid shares, provided that the total number of shares which are considered in consequence to be liquid shares for which that Member State is the most relevant market does not exceed the minimum number specified by that Member State. |
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The competent authority shall designate the additional liquid shares successively in decreasing order of average daily turnover from among the shares for which it is the relevant competent authority that are admitted to trading on a regulated market and are traded daily. |
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4. |
For the purposes of the first subparagraph of paragraph 1, the calculation of the free float of a share shall exclude holdings exceeding 5% of the total voting rights of the issuer, unless such a holding is held by a collective investment undertaking or a pension fund. |
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Voting rights shall be calculated on the basis of all the shares to which voting rights are attached, even if the exercise of such a right is suspended. |
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5. |
A share shall not be considered to have a liquid market for the purposes of Article 27 of [the MiFID] Directive 2004/39/EC until six weeks after its first admission to trading on a regulated market, if the estimate of the total market capitalisation for that share at the start of the first day's trading after that admission, provided in accordance with Article 33(3) [of the MiFID Regulation], is less than EUR 500 million. |
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6. |
Each competent authority shall ensure the maintenance and publication of a list of all liquid shares for which it is the relevant competent authority. |
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It shall ensure the list is current by reviewing it at least annually. |
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The list shall be made available to the Committee of European Securities Regulators. It shall be considered as published when it is published by the Committee of European Securities Regulators in accordance with Article 34(5) [of the MiFID Regulation]. |
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[Note: Article 22 of the MiFID Regulation] |
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In order to determine the standard market size for liquid shares, those shares shall be grouped into classes in terms of the average value of orders executed in accordance with Table 3 in Annex II [of the MiFID Regulation]. |
[Note: Article 23 of the MiFID Regulation] |
Table 3: Standard market sizes
Class in terms of average value of transactions (AVT) |
AVT< €10 000 |
€10 000 <AVT< €20 000 |
€20 000 <AVT< €30 000 |
€30 000 <AVT< €40 000 |
€40 000 <AVT< €50 000 |
€50 000 <AVT< €70 000 |
€70 000 <AVT< €90 000 |
Etc |
Standard market size |
€7 500 |
€15 000 |
€25 000 |
€35 000 |
€45 000 |
€60 000 |
€80 000 |
Etc |
[Note: Table 3 of Annex II of the MiFID Regulation] |
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The FSA will publish on its website a link to 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.