sou · GUB350d2 · 2007-01-01 00:00:00 — Non-binding guidance of this kind might, among other things, clarify how the provisions of this Regulation and Directive 2004/39/EC apply in the light of market developments. To ensure a uniform application of this Regulation and that Directive, the Commission may issue guidance by way of interpretative communications or other means. Furthermore, the Committee of Regulators may issue guidance in order to secure convergent application of this Regulation and that Directive by competent authorities. (7)For the purposes of the provisions on record-keeping, a reference to the nature of the order should be understood as referring to its status as a limit order, market order, or other specific type of order. [Transaction reporting] (6)(8) It is not necessary at this stage to specify or prescribe in detail the type, nature and sophistication of the arrangements for the exchange of information between competent authorities. (7)(9) Where a notification made by a competent authority relating to the alternative determination of the most relevant market in terms of liquidity is not acted upon within a reasonable time or where a competent authority does not agree with the calculation made by the other authority the competent authorities concerned should seek to find a solution. It is open to the competent authorities, where appropriate, to discuss the matter in the Committee of Regulators. (8)(10) The competent authorities should coordinate the design and of arrangements for the exchange of transaction information between themselves. Again it is open to the competent authorities to discuss those matters in the Committee of Regulators. Competent authorities should report to the Commission which should inform arrangements. In carrying out the coordination, competent authorities should consider the need to monitor the activities of investment firms effectively, so as to ensure that they act honestly, fairly and professionally and in a which promotes the integrity of the market in the Community, the need for decisions to be based on a thorough cost-benefit analysis, the need to ensure that transaction information is used only for the proper discharge of the functions of competent authorities and finally the need to have effective and accountable governance arrangements for any common system that might be considered necessary. (9)(11) It is appropriate to set the criteria for determining when the operations of a regulated market are of substantial importance in a host , and the consequences of that status in such a way as to avoid creating an obligation on a regulated market to deal with or be made subject to more than one competent authority where otherwise there would be no such obligation. [Market transparency] (10)(12) If granting waivers in relation to pre-trade transparency requirements, or authorising the deferral of post-trade transparency obligations, competent authorities should treat all regulated markets and MTFs equally and in a non-discriminatory , so that a waiver or deferral is granted either to all regulated markets and MTFs that they authorise under Directive 2004/39/EC, or to none. Competent authorities which grant the waivers or deferrals should not impose additional requirements. (11)(13) It is appropriate to consider that a trading algorithm operated by a regulated market or MTF usually should seek to maximise the volume traded, but other trading algorithms should be possible. (12)(14) A waiver from pre-trade transparency obligations arising under Articles 29 or 44 of Directive 2004/39/EC conferred by a competent authority should not enable investment firms to avoid such obligations in respect of those transactions in liquid shares which they conclude on a bilateral basis under the rules of a regulated market or an MTF where, if carried out outside the rules of the regulated market or MTF, those transactions would be subject to the requirements to publish quotes set out in Article 27 of that Directive. (15)Orders which are partly disclosed to the market, and the undisclosed part of which do not have the same time priority as the disclosed part, should benefit from the possibility of a waiver from pre-trade transparency obligations in respect of the undisclosed part. However, hidden orders, where no part of the order is visible to the market, or where the visible part of the order has the same time priority as the invisible part, should not so benefit. (13)(16) An activity should be considered as having a material commercial role for an investment firm if the activity is a significant source of revenue, or a significant source of cost. An assessment of significance for these purposes should, in every case, take into account the extent to which the activity is conducted or organised separately, the monetary value of the activity, and its comparative significance by reference both to the overall business of the firm and to its overall activity in the market in which the firm operates. It should be possible to consider an activity to be a significant source of revenue for a firm even if only one or two of the factors mentioned is relevant in a particular case. (14)(17) The requirement to make certain quotes, orders or transactions public pursuant to Articles 27, 28, 29, 30, 44 and 45 of Directive 2004/39/EC and this Regulation should not prevent regulated markets and MTFs from requiring their members or participants to make public other such information. (15)(18) Information which is required to be made available as close to real time as possible should be made available as close to instantaneously as technically possible, assuming a reasonable level of efficiency and of expenditure on systems on the part of the person concerned. The information should only be published close to the three minute maximum limit in exceptional cases where the systems available do not allow for a publication in a shorter period of time. (19)For the purposes of the provisions of this Regulation as to the admission of a financial instrument to trading on a regulated market, in the case of a security within the meaning of Directive 2003/71/EC of Parliament and of on the prospectus to be published when securities are offered to the public or admitted to trading and amending Directive 2001/34/EC2, there should be considered to be sufficient information publicly available of a kind needed to value that financial instrument. OJ L 345, 31.12.2003, p. [Admission to trading] (16)(20) The admission to trading on a regulated market of units issued by undertakings for collective investment in transferable securities should not allow the avoidance of the relevant provisions of Council Directive 85/611/EEC of on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS)3, and in particular Articles 44 to 48 of that Directive. [Commodity derivatives] (17)(21) A derivative contract should only be considered to be a financial instrument under Section C(7) of to Directive 2004/39/EC if it relates to a commodity and meets the criteria in this Regulation for determining whether a contract should be considered as having the characteristics of other derivative financial instruments and as not being for commercial purposes. A derivative contract should only be considered to be a financial instrument under Section C(10) of that if it relates to an underlying specified in Section C(10) or in this Regulation and meets the criteria in this Regulation for determining whether it should be considered as having the characteristics of other derivative financial instruments. (18)(22) The exemptions in Directive 2004/39/EC that relate to dealing on own account or to dealing or providing other investment services in relation to commodity derivatives covered by Sections C(5), C(6) and C(7) of to that Directive or derivatives covered by Section C(10) of that could be expected to exclude significant numbers of commercial producers and consumers of energy and other commodities, including energy suppliers, commodity merchants and their subsidiaries from the scope of that Directive and therefore such participants will not be required to apply the tests in this Regulation to determine if the contracts they deal in are financial instruments. (19)(23) In accordance with Section B(7) of to Directive 2004/39/EC, investment firms may exercise the freedom to provide ancillary services in a other than their home , by performing investment services and activities and ancillary services of the type included under Section A or B of to that Directive related to the underlying of the derivatives included under Section C(5), (6), (7) and (10), where these are connected to the provision of investment or ancillary services. On this basis, a firm performing investment services or activities, and connected trading in spot contracts, should be capable to take advantage of the freedom to provide ancillary services in respect of that connected trading. (20)(24) The definition of a commodity should not affect any other definition of that term in national legislation and other community legislation. The tests for determining whether a contract should be considered as having the characteristics of other derivative financial instruments and not being for commercial purposes are only intended to be used for the purposes of determining whether contracts fall within Section C(7) or C(10) of to Directive 2004/39/EC. 3OJ L 375, 31.12.1985, p.3. Directive as last amended by Directive 2005/1/EC (OJ L 79, 24.3.2005, p. (21)(25) A derivative contract should be understood as relating to a commodity or to another factor where there is a direct link between that contract and the relevant underlying commodity or factor. A derivative contract on the price of a commodity should therefore be regarded as a derivative contract relating to the commodity, while a derivative contract on the transportation costs for the commodity should not be regarded as a derivative contract relating to the commodity. A derivative that relates to a commodity derivative, such as an option on a commodity future (a derivative relating to a derivative) would constitute an indirect investment in commodities and should therefore still be regarded as a commodity derivative for the purposes of Directive 2004/39/EC. (22)(26) The concept of commodity should not include services or other items that are not goods, such as currencies or rights in real estate, or that are entirely intangible. (23)(27) The measures provided for in this Regulation are in accordance with the opinion of , HAS ADOPTED THIS REGULATION: This Regulation lays down the detailed rules for the implementation of Articles 4(1)(2), 4(1)(7), 13(6), 25, 27, 28, 29, 30, 40, 44, 45, 56 and 58 of Directive 2004/39/EC. 2.Articles 6 and 7 of this Regulation shall apply to management companies in accordance with Article 5(4) of Directive 85/611/EEC. For the purposes of this Regulation, the following definitions shall apply: (1)commodity means any goods of a fungible nature that are capable of being delivered, including metals and their ores and alloys, agricultural products, and energy such as electricity; (2)issuer means an entity which issues transferable securities and, where appropriate, other financial instruments; (3)Community issuer means an issuer which has its registered office in the Community; (4)third country issuer means an issuer which is not a Community issuer; (5)normal trading hours for a trading venue or an investment firm means those hours which the trading venue or investment firm establishes in advance and makes public as its trading hours; (6)portfolio trade means a transaction in more than one security where those securities are grouped and traded as a single lot against a specific reference price; (7)relevant competent authority for a financial instrument means the competent authority of the most relevant market in terms of liquidity for that financial instrument; (8)trading venue means a regulated market, MTF or systematic internaliser, in the case of a systematic internaliser, acting in its capacity as such, and, where appropriate, a system outside the Community with similar functions outside the Communityto a regulated market or MTF; (9)turnover, in relation to a financial instrument, means the sum of the results of multiplying the number of units of that instrument exchanged between buyers and sellers in a defined period of time, pursuant to transactions taking place on a trading venue or otherwise, by the unit price applicable to each such transaction; (10)securities financing transaction means an instance of stock lending or stock borrowing or the lending or borrowing of other financial instruments, a repurchase or reverse repurchase transaction, or a buy-sell back or sell-buy back transaction. Transactions related to an individual share in a portfolio trade and volume weighted average price transactions 1.A transaction related to an individual share in a portfolio trade shall be considered, for the purposes of Article 17(1)(b)(ii), as a transaction subject to conditions other than the current market price. It shall also be considered, for the purposes of Article 26(1)(b), as a transaction where the exchange of shares is determined by factors other than the current market valuation of the share. 2.A volume weighted average price transaction shall be considered, for the purposes of Article 17(1)(b)(ii), as a transaction subject to conditions other than the current market price. However, it shall not and, for the purposes of Article 24, be considered to beas an order subject to conditions other than the current market price. It shall also be considered, for the purposes of Article 26(1)(b), as a transaction where the exchange of shares is determined by factors other than the current market valuation of the share. References to trading day 1.A reference to a trading day in relation to a trading venue, or in relation to post-trade information to be made public under Article 30 or 45 of Directive 2004/39/EC in relation to a share, shall be a reference to any day during which the trading venue concerned is open for trading. A reference to the opening of the trading day shall be a reference to the commencement of the normal trading hours of the trading venue. A reference to noon on the trading day shall be a reference to noon in the time zone where the trading venue is established. A reference to the end of the trading day shall be a reference to the end of its normal trading hours. 2.A reference to a trading day in relation to the most relevant market in terms of liquidity for a share, or in relation to post-trade information to be made public under Article 28 of Directive 2004/39/EC in relation to a share, shall be a reference to any day of normal trading on trading venues in that market. A reference to the opening of the trading day shall be a reference to the earliest commencement of normal trading in that share on trading venues in that market. A reference to noon on the trading day shall be a reference to noon in the time zone of that market. A reference to the end of the trading day shall be a reference to the latest cessation of normal trading in that share on trading venues in that market. 3.A reference to a trading day in relation to a spot contract, within the meaning of Article 38(2), shall be a reference to any day of normal trading of that contract on trading venues. For the purposes of this Regulation, a reference to a transaction is a reference only to the purchase and sale of a financial instrument,. For the purposes of this Regulation, other than Chapter II, the purchase and sale of a financial instrument does not include any of the following: (a)securities financing transactions; (b)the exercise of options or of covered warrants; (c)primary market transactions (such as issuance, allotment or subscription) in financial instruments falling within Article 4(1)(18)(a) and (b) of Directive 2004/39/EC. Article 5A [moved from Article 34] First admission to trading of a share on a regulated market For the purposes of this Regulation, the first admission to trading of a share on a regulated market referred to in Article 40 of Directive 2004/39/EC shall be considered to take place at a time when one of the following conditions applies: (a)the share has not previously been admitted to trading on a regulated market; (b)the share has previously been admitted to trading on a regulated market but the share is removed from trading on every regulated market which has so admitted it. : client orders and transactions (Article 13(6) of Directive 2004/39/EC) of client orders and decisions to deal An investment firm shall, in relation to every order received from a client, and in relation to every decision to deal taken in providing the service of portfolio management, promptlyimmediately make a record of the following details, to the extent they are applicable to the order or decision to deal in question: (a)the name or other designation of the client; (b)the name or other designation of any relevant person acting on behalf of the client; (c)the details specified in points point 4, 6, 16, 18 and in points 16 to 19, of Table 1 of ; (d)the nature of the order; (e)any other details, conditions and particular instructions from the client that specify how the order must be carried out; (f)the date and exact time of the receipt of the order, or of the decision to deal, by the investment firm. (Article 13(6) of Directive 2004/39/EC) 1.Immediately after executing a client order, or, in the case of investment firms that transmit orders to another person for execution, immediately after receiving confirmation that an order has been executed, investment firms shall record the following details of the transaction in question: (a)the name or other designation of the client; (b)the details specified in points 2, 3, 4, 6, 16, and in points 1816 to 21, of Table 1 of ; (c)the total considerationprice, being the product of the unit price and the quantity; (d)the natural person who executed the transaction or who is responsible for the execution. 2.If an investment firm transmits an order to another person for execution, the investment firm shall immediately record the following details after making the transmission: (a)the name or other designation of the client whose order has been transmitted; (b)the name or other designation of the person to whom the order was transmitted; (c)the terms of the order transmitted; (d)the date and exact time of transmission. (Second subparagraph of Article 25(3) of Directive 2004/39/EC) Determination of the most relevant market in terms of liquidity 1.The most relevant market for a financial instrument in terms of liquidity, hereinafter the most relevant market, shall be determined in accordance with paragraphs 2 to 9. 2.In the case of a share or other transferable security covered by Article 4(1)(18)(a) of Directive 2004/39/EC or of a unit in a collective investment undertaking, the most relevant market shall be the where the share or the unit was first admitted to trading on a regulated market. 3.In the case of a bond or other transferable security covered by Article 4(1)(18)(b) of Directive 2004/39/EC or of a money market instrument which, in either case, is issued by a subsidiary, within the meaning of Directive 83/349/EEC of 13 1983 on consolidated accounts4, of an entity which has its registered office in a , the most relevant market shall be the where the registered office of the parent entity is situated. 4.In the case of a bond or other transferable security covered by Article 4(1)(18)(b) of Directive 2004/39/EC or of a money market instrument which, in either case, is issued by a Community issuer and which is not covered by paragraph 3 of this Article, the most relevant market shall be the where the registered office of the issuer is situated. 5.In the case of a bond or other transferable security covered by Article 4(1)(18)(b) of Directive 2004/39/EC or a money market instrument which, in either case, is issued by a third country issuer and which is not covered by paragraph 3 of this Article, the most relevant market shall be the where that security was first admitted to trading on a regulated market. 6.In the case of a derivative contract or a financial contract for differences or a transferable security covered by Article 4(1)(18)(c) of Directive 2004/39/EC, the most relevant market shall be: (a)where the underlying security is a share or other transferable security covered by Article 4(1)(18)(a) of Directive 2004/39/EC which is admitted to trading on OJ L 193 , 18.07.1983, p. a regulated market, the deemed to be the most relevant market in terms of liquidity for the underlying security, in accordance with paragraph 2; (b)where the underlying security is a bond or other transferable security covered by Article 4(1)(18)(b) of Directive 2004/39/EC which is admitted to trading on a regulated market, the deemed to be the most relevant market in terms of liquidity for that underlying security, in accordance with paragraphs 3, 4 or 5; (c)where the underlying is an index composed of shares all of which are traded on a particular regulated market, the where that regulated market is situated. 7.In any case not covered by paragraphs 2 to 6, the most relevant market shall be the where the regulated market that first admitted the transferable security or derivative contract or financial contract for differences to trading is located. 8.Where a financial instrument covered by paragraphs 2, 5 or 7, or the underlying financial instrument of a financial instrument covered by paragraph 6 to which one of paragraphs 2, 5 or 7 is relevant, was first admitted to trading on more than one regulated market simultaneously, and all those regulated markets share the same home , that be the most relevant market. 9.Where the regulated markets concerned do not share the same home , the most relevant market in terms of liquidity for that instrument shall be the market where the turnover of that instrument is highest. For the purposes of determining the most relevant market where the turnover of the instrument is highest, each competent authority that has authorised one of the regulated markets concerned shall calculate the turnover for that instrument in its respective market for the previous calendar year, provided that the instrument was admitted to trading at the beginning of that year. Where the turnover for the relevant financial instrument cannot be calculated by reason of insufficient or non-existent data and the issuer has its registered office in a , the most relevant market shall be the market of the where the registered office of the issuer is situated. However, where issuer does not have its registered office in a , the most relevant market for that instrument shall be the market where the turnover of the relevant instrument class is the highest. For the purposes of determining that market, each competent authority that has authorised one of the regulated markets concerned shall calculate the turnover for the instruments of the same class in its respective market for the preceding calendar year. The relevant of financial instrument are the following: (a)shares; (b)bonds or other forms of securitised debt; (c)any other financial instruments. (Secondsecond subparagraph of Article 25(3) and Article 58(3) of Directive 2004/39/EC) Alternative determination of most relevant market in terms of liquidity 1.A competent authority may, in January every year, notify the relevant competent authority for a particular financial instrument that it intends to contest the determination, made in accordance with Article 8, of the most relevant market for that instrument.