EU REGULATIONS – MiFID


MiFID II

On 3 January 2018 the revised Market in Financial Instruments Directive (MiFID), and its accompanying Regulation (MiFIR), took effect across the whole of the European Economic Area (EEA). MiFID II, as it is collectively known, is a complex and multifaceted piece of legislation that has started to have a profound effect on market operations and which will undoubtedly continue to shape the world of trading in predictable and unpredictable ways for years to come.

In response to MiFID II, 360T has built upon its renowned Over the Counter (OTC) trading platform, i.e. TEX – (itself governed by MiFID for facilitating the “receipt and Transmission of orders” ) – and now offers a fully MiFID II compliant Multilateral Trading Facility (MTF) for trading Foreign Exchange (FX) derivative products including: FX Swaps, Forwards, Non-Deliverable Forwards, Non-Deliverable Swaps and FX Options.

360T will of course continue to offer its OTC platform which will be of particular interest to those clients who are not per se subject to MiFID II. However, in adding an MTF to its suite of regulated trading platforms and through leveraging our unique relationship with our parent company, Deutsche Börse Group, 360T is now uniquely positioned to ensure that all its clients are offered the most optimal and efficient solutions to help them comply with their own regulatory trading requirements.

Asides from its MTF trading venue, in relation to MiFID II 360T can also 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.

To keep clients informed of current and future developments concerning MiFID we will regularly post guidance and explanations on this website. Alternatively, if you would like to explore or to discuss your 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




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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.