EU REGULATIONS – MiFID
On 3 January 2018, the much delayed Market in Financial Instruments Directive (MiFID) and its accompanying Regulation (MiFIR), will finally take effect across the whole of the European Economic Area. MiFID II, as it is collectively known, is a complex and multifaceted piece of legislation that will have a profound effect on market operations and shape the world of trading in predictable and unpredictable ways for years to come.
In response to MiFID II, 360T will provide a fully compliant trading venue and, leveraging our unique relationship with our parent company, Deutsche Börse Group, we will help our clients to ensure that they are offered the most optimal and efficient solutions to help them comply with their own MiFID requirements.
From 3 January 360T will:
- Offer a MiFID authorised Multilateral Trading Facility (MTF) platform for trading FX derivative products including Swap, Forward, NDF, NDS and options,
- Offer a full range of solutions to support bespoke client needs in relation to transaction reporting and other regulatory matters through our partnership with Deutsche Börse Regulatory Hub; and,
- Continue to offer our TEX platform for trading in all FX and other OTC asset classes for non-MiFID Trading activities.
To keep clients informed of developments we will regularly post guidance and explanations on this website, including detailed responses to various Q&A’s. Alternatively, if you would like to explore what will be on offer and / or to discuss your future MiFID needs we would be delighted to hear from you. In the first instance please contact your relationship manager or, email queries to regulation@360T.com
360T can assure you that post the introduction of MiFID II, 360T will continue to meet your trading needs by providing a fully compliant, transparent and world class trading environment.
For I-TEX Intragroup Solution -> Download White Paper – 360T´s Response to Matched Principal Trading and PRIIPs
MiFID for corporates
Although there may be some corporate entities who, for their own particular reasons, may choose to trade on a MiFID II defined trading venue – i.e. a Recognised Exchange, Multilateral Trading Facility, (MTF – such as the MTF offered by 360T), or on an Organised Trading Facility (OTF) – it is 360T’s view that the majority of corporates will choose not to do so.
In an amendment to the legislation in 2016, Non-Financial Corporate (NFC) entities where expressly exempted from MiFID provided that they did not, amongst other things, apply high frequency trading techniques or trade on trading venues for purposes other than hedging. The full text of the amendment can be found here: http://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32016L1034&from=EN
With regard to hedging, though there has been some concern expressed that an overtly rigid interpretation of the amended legislation would suggest that even incidental speculative activity could expose the NFC to authorisation under MiFID, we do not believe this to be the case. The legislation cannot have been intended to inadvertently capture NFC’s undertaking normal treasury activities and hence we suggest that the amendment needs to be interpreted in the round. That said, it is for each NFC to determine whether their business model is in the round defensible as measurably reducing risk relating to commercial activity, or whether it is of a significantly speculative nature. If of the latter then that NFC will of course need to approach their home country National Competent Authority (Regulator) to determine whether they require to be become an authorised firm.
360T is also cognisant of the fact that no class of FX derivatives have been subject to a trading mandate. This means that that neither Financial Counterparties (FC’s) nor those entities that might qualify as NFC+ under the European Market Infrastructure regulation (EMIR) are under any obligation to trade FX derivatives on a regulated trading venue.
As a consequence of the various MiFID exemptions available and in light of there being no trading mandate for FX derivatives, then for the benefit of its large corporate client base 360T has therefore elected to retain its current OTC platform. Whether in Europe or elsewhere, 360T considers it imperative that non-financial corporate entities should have secure and unfettered access to the wholesale FX markets.
Note: The rules relating to trading in commodity derivatives are more complex than those in relation to FX. We would therefore advise any corporate engaged in commodity business to ensure they understand the exemptions available.