On 13 July 2018, the European Securities and Markets Authority (ESMA) published a consultation paper on amendments to Commission Delegated Regulation (EU) 2017/588 (RTS 11).

Under RTS 11, the minimum tick size applicable to shares and depositary receipts is calibrated to the average daily number of transactions on the most liquid market in the EU. However, MiFID II and RTS 11 do not include any specific provisions with respect to third country instruments (i.e. financial instruments traded or admitted to trading on an EU trading venue where the most liquid trading venue by turnover is located outside the EU). As a consequence, the minimum tick size for these financial instruments is determined solely on trading activity in the EU, with no consideration of the liquidity on non-EU venues.

ESMA has therefore issued this consultation paper setting out proposals that introduce amendments to RTS 11 to ensure that the tick sizes applicable to third country instruments are adequate and appropriately calibrated. The proposals include:

  • authorising EU trading venues to use the tick size applicable to the most liquid third country venue;
  • subjecting third country shares to a regime similar to Exchange-Traded Funds;
  • taking into account trading volumes executed on the most liquid third country venue for the determination of the average daily number of transactions; and
  • allowing the competent authorities of trading venues trading a third country instrument to coordinate and to agree on an adjusted average daily number of transactions that reflects the liquidity available on third country venues on a case-by-case basis.

The deadline for comments on the consultation paper is 7 September 2018.