On February 28, the European Securities and Markets Authority (ESMA) published its final report on draft regulatory technical standards (RTS) for package orders under the revised Markets in Financial Instruments Directive and Regulation (MiFID II). The final report summarises the proposals set out by ESMA in a Consultation Paper 10 November 2016 (see previous regulatory update) and narrows down the universe of package orders that qualify as having a liquid market as a whole. Below are some of the key amendments from the revised RTS:
- In order for a package order to be deemed liquid, all components must be subject to the trading obligation. This is in contrast to the consultation, where at least one component had to be subject to the trading obligation;
- All components must be subject to the clearing obligation (under MiFIR and EMIR):
- A package order must contain no more than 4 components;
- All components must be from the same RTS 2 asset class, e.g. packages composed only of interest rate derivatives or of CDS indices are considered to have a liquid market as a whole; and
- All components must be denominated in the same currency (this was unclear in the consultation).
The report has now been sent to the European Commission (Commission) for approval and the Commission has three months to decide whether to endorse the RTS.