MiFID II Information for Credit Institutions

The Markets in Financial Instruments Directive II (MiFID II), which was transposed into Irish Law as S.I. No. 375 of 2017, and the accompanying Markets in Financial Instruments Regulation (MiFIR) come into effect on 3 January 2018.  
MiFID II enhances existing requirements around investor protection and transparency and it reforms existing market infrastructure.   MiFID II also builds on MiFID I in the following ways:

  • Ensuring that organised trading takes place on regulated platforms;
  • Introducing rules on algorithmic and high frequency trading;
  • Introducing a new multilateral trading venue, the Organised Trading Facility (OTF) for non-equity instruments to trade on multilateral trading platforms;
  • Clarifying the definition of a systematic internaliser through the provision of quantitative thresholds;
  • Improving the transparency and oversight of financial markets – including derivatives markets;
  • Enhancing investor protection and improving conduct of business rules, as well as conditions for competition in the trading and clearing of financial instruments.

MiFIR includes new requirements relating to:

  • Disclosure of data on trading activity to the public;
  • Disclosure of transaction data to regulators and supervisors;
  • Mandatory trading of derivatives on organised venues;
  • Removal of barriers between trading venues and providers of clearing services to ensure more competition; and
  • Specific supervisory actions regarding financial instruments and positions in derivatives.

Institutions are advised to consult the European Commission, ESMA and EBA websites for details of MiFID II Level 2 measures/technical standards and Level 3 guidance.

 

Transaction Reporting Obligations

As set out in MiFIR Article 1(2), MiFIR applies to credit institutions authorised under CRD IV when providing investment services and/or performing investment activities.  MiFIR introduces a new transaction reporting regime.  New standards and formats are prescribed in the legislation.  The scope includes additional financial instruments, trading venues and reporting firms. 
Please refer to the section on Transaction Reporting for additional information.  If you have a query about the transaction reporting, read more about it on our website.

Systematic Internaliser

A Systematic Internaliser is an institution that on an organised, frequent, systematic and substantial basis, deals on own account when executing client orders outside a regulated market, a Multilateral Trading Facility (MTF) or an Organised Trading Facility (OTF). 
MiFID II and MiFIR set out requirements for Systematic Internalisers including notifying the Central Bank when an institution becomes a Systematic Internaliser.  Institutions that either meet the definition of a Systematic Internaliser, or decide to ‘opt-in’ to become a Systematic Internaliser, are required to notify the Central Bank of Ireland. 
Credit Institutions that meet the definition of a Systematic Internaliser or are considering opting into the Systematic Internaliser regime, should contact the Market Surveillance unit of the Central Bank to request a copy of the notification form to be completed, please e-mail marketsurveillance@centralbank.ie

Systematic Internalisers are also required to provide reference data relating to those financial instruments traded on its system directly to ESMA.

Tied Agents

In accordance with Regulation 37(5) of S.I. No. 375 of 2017, the Central Bank is required to publish a register of tied agents of credit institutions and include on the register all tied agents established within the State.
A tied agent means a natural or legal person who

  • under the full and unconditional responsibility of only one investment firm on whose behalf it acts, promotes investment or ancillary services (or both) to clients or prospective clients;
  • receives and transmits instructions or orders from the client in respect of investment services or financial instruments;
  • places financial instruments or provides advice to clients or prospective clients in respect of those financial instruments or services.

As set out under Regulation 37(6) of S.I No. 375 of 2017,  the Central Bank may include a tied agent on the public register only if it is satisfied that the tied agent—
(a) is of good repute, and
(b) possesses the appropriate general, commercial and professional knowledge and competence to enable the tied agent to deliver—
i. the investment services or ancillary services which the tied agent is to deliver, and
ii. the accurate communication of all relevant information about those services, to the client or potential client of the investment firm for whom the tied agent acts or will act.

Credit institutions are only permitted to appoint tied agents in the State if they are entered on the register of tied agents.

There are currently no MiFID II tied agents registered by credit institutions with the Central Bank.

Where a credit institution wishes to appoint a tied agent, they are requested to email authorise@centralbank.ie for further information