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MiFID II’s systematic internaliser regime has been forced into the spotlight
as market participants stand in fear of its impact. Hayley McDowell
unravels the story of the regime and asks market experts about the
possible unintended consequences.
S
ystematic internaliser (SI) is
not a new term. It was first
introduced under MiFID in
2007, but the system has remained
dormant over several years. There
are currently 11 firms registered as
an SI, including the likes of Gold-
man Sachs, Citi, UBS and Credit
Suisse. Although this figure will
grow substantially under MiFID
II due to come into effect on 3
January 2018.
An SI under MiFID II and MIFIR
is considered to be an investment
firm that deals on its own account
by executing client orders - on an
organised, frequent and system-
atic basis - outside of a regulated
market, multilateral trading facility
(MTF) or organised trading facility
(OTF).
MiFID II has widened the scope
of firms deemed to be an SI - some-
thing which caused a lot of con-
fusion among market participants
when first announced - and virtu-
ally all financial instruments are
now included under the regime.
Quantitative thresholds have
been introduced by the European
Securities and Market Authority
(ESMA) and firms will be required
to carry out assessments based
on these thresholds to determine
whether they are in fact an SI.
The thresholds aren’t necessar-
ily a problem for firms, in fact it
should be quite straight forward
to determine if an institution is
an SI or not. The problem is the
potential ‘unintended consequenc-
es’ following the implementation
of the regime.
“What we don’t know is the
impact and how the regime will
play out in practice,” Joe McHale,
head of EMEA regulatory strat-
egy at Bloomberg LP, said at The
TRADE’s MiFID II pop-up event
in London in February. “There are
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