MiFIR sets out a trading obligation applicable to non-intra group transactions in sufficiently liquid contracts when traded by counterparties subject to clearing under EMIR. The application of the trading obligation is defined under Article 32 MiFIR, which outlines the process for deciding which derivatives should be declared subject to mandatory trading. Once a class of derivatives has been mandated as subject to the clearing obligation under EMIR, the European Securities and Markets Authority (ESMA) must determine whether those derivatives (or a subset of such) should be subject to the trading obligation, meaning they can only be traded on a regulated market, multilateral trading facility, organised trading facility or a third country venue deemed to be equivalent by the European Commission.

In summary, whether or not a class of derivatives subject to the clearing obligation should also be made subject to the trading obligation will be determined by two main factors:

  • the venue test: the class of derivatives must be admitted to trading or traded on at least one admissible trading venue; and
  • the liquidity test: whether the derivatives are “sufficiently liquid” and there is sufficient third party buying and selling interest.

Article 32 of MiFIR empowers the European Commission (Commission) to adopt, following submission of draft standards by ESMA delegated acts to further specify the criteria for the determination of sufficient third-party buying and selling interest in a class of derivatives or a relevant subset of a class of derivatives. Draft regulatory technical standards (RTS) were produced by ESMA and submitted to the Commission on 28 September 2015. The Commission has now adopted a Delegated Regulation containing the RTS Commission Implementing Regulation content.

If neither the European Parliament or the Council of the EU objects to the Delegated Regulation it will enter into force 20 days after its publication in the Official Journal of the EU.  It applies from the date appearing in the second subparagraph of Article 55 of MiFIR.

View Commission Delegated Regulation (EU) of 26.5.2016 supplementing Regulation (EU) No.600/2014 of the European Parliament and of the Council on markets in financial instruments with regard to regulatory technical standards on criteria for determining whether derivatives subject to the clearing obligation should be subject to the trading obligation, 26 May 2016