Friday 26 October 2012

Markets in financial instruments and amendment of the EMIR Regulation on OTC derivatives, central counterparties and trade repositories ***I

P7_TA(2012)0407

Amendments adopted by the European Parliament on 26 October 2012 on the proposal for a regulation of the European Parliament and of the Council on markets in financial instruments and amending Regulation [EMIR] on OTC derivatives, central counterparties and trade repositories (COM(2011)0652 – C7-0359/2011 – 2011/0296(COD)) (1)

2014/C 72 E/23

(Ordinary legislative procedure: first reading)

[Amendment No 1 unless otherwise indicated]

AMENDMENTS BY THE EUROPEAN PARLIAMENT (2)

to the Commission proposal

(1) The matter was referred back to the committee responsible for reconsideration pursuant to Rule 57(2), second subparagraph (A7-0303/2012).

(2) Amendments: new or amended text is highlighted in bold italics; deletions are indicated by the symbol ▐.

Friday 26 October 2012

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

on markets in financial instruments and amending Regulation (EU) No 648/2012 on OTC derivatives, central counterparties and trade repositories

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union, and in particular Article 114 thereof,

Having regard to the proposal from the European Commission,

After transmission of the draft legislative act to the national parliaments,

Having regard to the opinion of the European Economic and Social Committee (1),

Acting in accordance with the ordinary legislative procedure (2),

Whereas:

(1) The recent financial crisis has exposed weaknesses in the transparency of financial markets which can contribute to harmful socio-economic effects . Strengthening transparency is one of the shared principles to strengthen the financial system as confirmed by the G-20 Leaders' Statement in London on 2 April 2009. In order to strengthen the transparency and improve the functioning of the internal market for financial instruments, a new framework establishing uniform requirements for the transparency of transactions in markets for financial instruments should be put in place. The framework should establish comprehensive rules for a broad range of financial instruments. It should complement requirements for the transparency of orders and transactions in respect of shares established in Directive 2004/39/EC of the European Parliament and the Council of 21 April 2004 on markets in financial instruments (3).

(2) The High Level Group on Financial Supervision in the EU chaired by Jacques de Larosière invited the Union to develop a more harmonised set of financial regulations. In the context of the future European supervision architecture, the European Council of 18 and 19 June 2009 also stressed the need to establish a European single rule book applicable to all financial institutions in the internal market.

(3) The new legislation should as a consequence consist of two different legal instruments, a directive and this Regulation. Together, both legal instruments should form the legal framework governing the requirements applicable to investment firms, regulated markets and data reporting services providers. This Regulation should therefore be read together with the directive. The need to establish a single set of rules for all institutions in respect of certain requirements and to avoid potential regulatory arbitrage as well as to provide more legal certainty and less regulatory complexity for market participants warrants the use of a legal basis allowing for the creation of a regulation. In order to remove the remaining obstacles to trade and significant distortions of competition resulting from divergences between national laws and to prevent any further likely obstacles to trade and significant distortions of competition from arising, it is therefore necessary to adopt a Regulation establishing uniform rules applicable in all Member States. This directly applicable legal act aims at contributing in a determining manner to the smooth functioning of the internal market and should, consequently, be based on the provisions of Article 114 of the Treaty on the Functioning of the European Union (TFEU), as interpreted in accordance with the consistent case-law of the Court of Justice of the European Union.

(4) Directive 2004/39/EC established rules for making the trading in shares admitted to trading on a regulated market pre- and post-trade transparent and for reporting transactions in financial instruments admitted to trading on a regulated market to competent authorities; the Directive needs to be recast in order to appropriately reflect developments in financial markets and to address weaknesses and to close loopholes that were inter alia exposed in the financial market crisis.

(5) Provisions in respect of trade and regulatory transparency requirements need to take the form of directly applicable law applied to all investment firms that should follow uniform rules in all Union markets, in order to provide for a uniform application of a single regulatory framework, to strengthen confidence in the transparency of markets across the Union, to reduce regulatory complexity and firms' compliance costs, especially for financial institutions operating on a cross-border basis, and to contribute to the elimination of distortions of competition. The adoption of a regulation ensuring direct applicability is best suited to accomplish those regulatory goals and ensure uniform conditions by preventing diverging national requirements as a result of the transposition of a directive.

(6) The definitions of regulated market and multilateral trading facility (MTF) should be clarified and remain closely aligned with each other to reflect the fact that they represent effectively the same organised trading functionality. The definitions should exclude bilateral systems where an investment firm enters into every trade on own account, even as a riskless counterparty interposed between the buyer and seller. The term ‘system’ encompasses all those markets that are composed of a set of rules and a trading platform as well as those that only function on the basis of a set of rules. Regulated markets and MTFs are not obliged to operate a ‘technical’ system for matching orders and should be able to operate other trading protocols including systems whereby users are able to request quotes from multiple providers . A market which is only composed of a set of rules that governs aspects related to membership, admission of instruments to trading, trading between members, reporting and, where applicable, transparency obligations is a regulated market or an MTF within the meaning of this Regulation and the transactions concluded under those rules are considered to be concluded under the systems of a regulated market or an MTF. The definitions require that interests be brought together in such a way as to result in a contract which occurs where execution takes place under the system's rules or by means of the system's protocols or internal operating procedures. The term ‘buying and selling interests’ is to be understood in a broad sense and includes orders, quotes and indications of interest. One of the important requirements concerns the obligation that the interests be brought together in the system by means of non-discretionary rules set by the system operator means that they are brought together under the system's rules or by means of the system's protocols or internal operating procedures (including procedures embodied in computer software). The term ‘non-discretionary rules’ means ▐ rules that leave the regulated market or the market operator or investment firm operating an MTF with no discretion as to how interests may interact. ▐

(7) In order to make European markets more transparent and efficient to level the playing field between various venues offering multilateral trading services it is necessary to introduce a new category of organised trading facility (OTF) for bonds, structured finance products, emissions allowances and derivatives and to ensure that it is appropriately regulated and applies non-discriminatory rules regarding access to the facility . This new category is broadly defined so that now and in the future it should be able to capture all types of organised execution and arranging of trading which do not correspond to the functionalities or regulatory specifications of existing venues. Consequently appropriate organisational requirements and transparency rules which support efficient price discovery need to be applied. The new category includes broker crossing systems, which can be described as internal electronic matching systems operated by an investment firm which execute client orders against other client orders. The new category also encompasses systems which should be eligible for trading clearing-eligible and sufficiently liquid derivatives but which do not have the characteristics of the existing categories of trading venue. By contrast, it should not include facilities where there is no genuine trade execution or arranging taking place in the system, such as bulletin boards used for advertising buying and selling interests, other entities aggregating or pooling potential buying or selling interests, or electronic post-trade confirmation services.

(8) This new category of OTF will complement the existing types of trading venues. While regulated markets and MTFs are characterised by non-discretionary execution of transactions, the operator of an OTF should have discretion over how a transaction is to be executed. Consequently, conduct of business rules, best execution and client order handling obligations should apply to the transactions concluded on an OTF operated by an investment firm or a market operator. However, because an OTF although only accessible to its clients constitutes a genuine trading platform, the platform operator should be neutral. Therefore, the operator of an OTF should be subject to requirements in relation to the sound management of potential conflicts of interest and non-discriminatory execution and should not be allowed to execute in the OTF any transaction between multiple third-party buying and selling interests including client orders brought together in the system against his own proprietary capital. This should also exclude them from acting as systematic internalisers in the OTF operated by them.

(9) All organised trading should be conducted on regulated venues with maximal pre- and post-trade transparency . Appropriately calibrated transparency requirements should therefore ▐ apply to all types of trading venues, and to all financial instruments traded thereon.

(10) Trading in depositary receipts, exchange-traded funds, certificates, similar financial instruments and shares other than those admitted to trading on a regulated market takes place in largely the same fashion, and fulfils a nearly identical economic purpose, as trading in shares admitted to trading on a regulated market. Transparency provisions applicable to shares admitted to trading on regulated markets should thus be extended to these instruments.

(11) While, in principle, acknowledging the need for a regime of waivers from pre-trade transparency to support the efficient functioning of markets, the actual waiver provisions for shares currently applicable on the basis of Directive 2004/39/EC and of Regulation (EC) No 1287/2006 of 10 August 2006 implementing Directive 2004/39/EC of the European Parliament and of the Council as regards record-keeping obligations for investment firms, transaction reporting, market transparency, admission of financial instruments to trading, and defined terms for the purposes of that Directive (4), need to be scrutinised as to their continued appropriateness in terms of scope and conditions applicable. In order to ensure a uniform application of the waivers from pre-trade transparency in shares and eventually other similar instruments and non-equity products for specific market models and types and sizes of orders, the European Supervisory Authority (European Securities and Markets Authority) (ESMA) established by Regulation (EU) No 1095/2010 of the European Parliament and of the Council (5) should assess the compatibility of individual requests for applying a waiver with this Regulation and future delegated acts. ESMA's assessment should take the form of an opinion in accordance with Article 29 of Regulation (EU) No 1095/2010. In addition, the already existing waivers for shares should be reviewed by ESMA within an appropriate timeframe and an assessment should be made, following the same procedure, as to whether they are still in compliance with the rules set out in this Regulation and in delegated acts provided for herein.

(12) The financial crisis exposed specific weaknesses in the way information on trading opportunities and prices in financial instruments other than shares is available to market participants, namely in terms of timing, granularity, equal access, and reliability. Timely pre- and post-trade transparency requirements taking account of the different characteristics and market structures of specific types of instruments other than shares should thus be introduced and adapted as necessary so as to be workable for request-for-quote systems, whether automated or involving voice trading . In order to provide a sound transparency framework for all relevant instruments, these should apply to bonds and structured finance products with a prospectus or which are admitted to trading either on a regulated market or are traded on an MTF or an OTF, to derivatives which are traded or admitted to trading on regulated markets, MTFs and OTFs or considered eligible for central clearing, as well as, in the case of post-trade transparency, to derivatives reported to trade repositories. Thus only those financial instruments ▐ which ▐ are bespoke in their design or insufficiently liquid would be outside the scope of the transparency obligations.

(13) It is necessary to introduce an appropriate level of trade transparency in markets for bonds, structured finance products and derivatives in order to help the valuation of products as well as the efficiency of price formation. Structured finance products should, in particular, include asset backed securities as defined in Article 2(5) of Regulation (EC) No 809/2004 (6), comprising among others collateralised debt obligations.

(13a) In the interests of legal certainty, it is appropriate to clarify certain exclusions from the scope of this Regulation. While it is important to regulate currency derivatives including currency swaps which give rise to a cash settlement determined by reference to currencies in order to ensure transparency and market integrity spot currency transactions should not fall within the scope of this Regulation. Similarly, it is important to clarify that contracts of insurance in respect of activities of classes set out in Annex I to Directive 2009/138/EC of the European Parliament and of the Council of 25 November 2009 on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II) (7) are not derivatives for the purposes of this Regulation if entered into with a Union or third-country insurance or reinsurance undertaking. Furthermore while risks arising from algorithmic trading should be regulated the use of algorithms in post-trade risk reduction services does not constitute algorithmic trading.

(14) In order to ensure uniform applicable conditions between trading venues, the same pre- and post-trade transparency requirements should apply to the different types of venues. The transparency requirements should be proportionate and calibrated for different types of instruments, including equities, bonds, and derivatives, taking into account the interests of investors and issuers, including government bond issuers, and market liquidity. The requirements should also be calibrated for different types of trading, including order-book and quote-driven systems such as request for quote as well as hybrid and voice broking systems, and take account of issuance, transaction size and characteristics of national markets.

(15) In order to ensure that trading carried out over the counter (OTC) does not jeopardise efficient price discovery or a transparent level-playing field between means of trading, appropriate pre-trade transparency requirements should apply to investment firms dealing on own account in financial instruments OTC insofar as it is carried out in their capacity as systematic internalisers in relation to shares, depositary receipts, exchange-traded funds, certificates or other similar financial instruments, and bonds, structured finance products, and clearing-eligible derivatives.

(16) An investment firm executing client orders against own proprietary capital should be deemed a systematic internaliser, unless the transactions are carried out outside regulated markets, MTFs and OTFs on an ▐ ad hoc and irregular basis. Systematic internalisers should be defined as investment firms which, on an organised regular and systematic basis, deal on own account by executing client orders bilaterally outside a regulated market, an MTF or an OTF. In order to ensure the objective and effective application of this definition to investment firms, any bilateral trading carried out by executing client orders should be relevant and quantitative criteria determined by financial instrument or by asset class could complement the qualitative criteria for the identification of investment firms required to register as systematic internalisers, laid down in Article 21 of Regulation (EC) No 1287/2006. While an OTF is any system or facility in which multiple third-party buying and selling interests interact in the system, a systematic internaliser should not be allowed to bring together third party buying and selling interests. In order to guarantee the quality of the price formation process it is appropriate to limit the circumstances in which OTC trading can be carried out outside a systematic internaliser and competent authorities should ensure that for shares no participant in a system where an investment firm executes client orders against own proprietary capital is in a privileged position with regard to order execution.

(17) Systematic internalisers may decide to give access to their quotes only to their retail clients, only to their professional clients, or to both. They should not be allowed to discriminate within those categories of clients but should be entitled to take account of distinctions between clients, for example in relation to credit risk . Systematic internalisers are not obliged to publish firm quotes in relation to transactions in equity instruments above standard market size and in non-equity instruments above retail market size . The standard market size or retail market size for any class of financial instrument should not be significantly disproportionate to any financial instrument included in that class.

(18) It is appropriate to ensure that as much trading as possible which occurs outside regulated execution venues takes place in organised systems to which appropriate transparency requirements apply while ensuring that large scale and irregular transactions can be concluded. It is not the intention that this Regulation require the application of pre-trade transparency rules to OTC transactions involving primary issuance , the characteristics of which include that the instruments are bespoke and designed for the specific requirements of eligible financial or non-financial counterparties and are part of a business relationship which is itself characterised by dealings above standard market size or standard retail market size, and where the deals are carried out outside the systems usually used by the firm concerned for its business as a systematic internaliser .

(19) Market data should be easily and readily available to users in a format as disaggregated as possible to allow investors, and data service providers serving their needs, to customise data solutions to the furthest possible degree. Therefore, pre- and post-trade transparency data should be made available to the public in an "unbundled" fashion in order to reduce costs for market participants when purchasing data and approved publication arrangements used to ensure the consistency and quality of such data and to enable the delivery of a consolidated tape for post-trade data .

(20) Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data (8) and Regulation (EC) No 45/2001 of the European Parliament and of the Council of 18 December 2000 on the protection of individuals with regard to the processing of personal data by the Community institutions and bodies and on the free movement of such data (9) should be fully applicable to the exchange, transmission and processing of personal data for the purposes of this Regulation, particularly Title IV, by Member States and ESMA.

(21) Considering the agreement reached by the parties to the G-20 Pittsburgh summit on 25 September 2009 to move trading in standardised OTC derivative contracts to exchanges or electronic trading platforms where appropriate, a formal regulatory procedure should be defined for mandating trading between financial counterparties and large non-financial counterparties in all derivatives which have been considered to be clearing-eligible and which are sufficiently liquid to take place on a range of trading venues subject to comparable regulation ▐. This Regulation is not intended to prohibit or limit the use of bespoke derivative contracts or make them excessively costly for non-financial institutions. Therefore, the assessment of sufficient liquidity should take account of market characteristics at national level including elements such as the number and type of market participants in a given market, and of transaction characteristics, such as the size and frequency of transactions in that market. In addition, this Regulation is not intended to prevent the use of post-trade risk reduction services.

(22) Considering the agreement reached by the parties to the G-20 in Pittsburgh on 25 September 2009 to move trading in standardised OTC derivative contracts to exchanges or electronic trading platforms where appropriate on the one hand, and the relatively lower liquidity of various OTC derivatives on the other, it is appropriate to provide for a suitable range of eligible venues on which trading pursuant to this commitment can take place. All eligible venues should be subject to closely aligned regulatory requirements in terms of organisational and operational aspects, arrangements to mitigate conflicts of interest, surveillance of all trading activity, pre-and post-trade transparency calibrated by financial instrument and trading model . The possibility for operators of venues to arrange transactions pursuant to this commitment between their participants in a discretionary fashion should however be foreseen in order to improve the conditions for execution and liquidity.

(23) The trading obligation established for these derivatives should allow for efficient competition between eligible trading venues. Therefore those trading venues should not be able to claim exclusive rights in relation to any derivatives subject to this trading obligation preventing other trading venues from offering trading in these instruments. For effective competition between trading venues for derivatives, it is essential that trading venues have non-discriminatory and transparent access to central counterparties (CCPs). Non-discriminatory access to a CCP should mean that a trading venue has the right to non-discriminatory treatment in terms of how contracts traded on its platform are treated in terms of collateral requirements and netting of economically equivalent contracts and cross-margining with correlated contracts cleared by the same CCP, and non-discriminatory clearing fees.

(24) In order to ensure the orderly functioning and integrity of financial markets, investor protection and financial stability it is necessary to provide a mechanism for monitoring of the design of investment products and for powers to prohibit or restrict the marketing, distribution and sale of any investment product or financial instrument giving rise to serious concerns regarding investor protection, the orderly functioning and integrity of financial markets, or the stability of the whole or part of the financial system, together with appropriate coordination and contingency powers for ESMA. The exercise of such powers by competent authorities and, in exceptional cases, by ESMA should be subject to the need to fulfil a number of specific conditions. Where those conditions are met, the competent authority or, in exceptional cases, ESMA should be able to impose a prohibition or restriction on a precautionary basis before an investment product or financial instrument has been marketed, distributed or sold to clients.

(25) Competent authorities should notify ESMA of the details of any of their requests to reduce a position in relation to a derivative contract, of any one-off limits, as well as of any ex-ante position limits in order to improve coordination and convergence in how these powers are applied. The essential details of any ex-ante position limits applied by a competent authority should be published on ESMA's website.

(26) ESMA should be able to request information from any person regarding their position in relation to a derivative contract, to request that position to be reduced, as well as to limit the ability of persons to undertake individual transactions in relation to commodity derivatives. ESMA should then notify relevant competent authorities of measures it proposes to undertake and should also publish those measures.

(27) The details of transactions in financial instruments should be reported to competent authorities through a system coordinated by ESMA, to enable them to detect and investigate potential cases of market abuse, to monitor the fair and orderly functioning of markets, as well as the activities of investment firms. The scope of such oversight includes all instruments which are admitted to trading on a regulated market or traded on a trading venue as well as all instruments the value of which depends on or influences the value of those instruments. In order to avoid an unnecessary administrative burden on investment firms, financial instruments not traded in an organised way and that are not susceptible to market abuse should be excluded from the reporting obligation. The reports should use a legal entity identifier in line with the G-20 commitments. The Commission should also report on whether the content and format of the reports are sufficient to detect market abuse, on priorities for monitoring given the vast amount of data reported, on whether the identity of the decision-maker responsible for the use of an algorithm is needed, and on specific arrangements needed to ensure robust reporting of securities lending and repurchase agreements so as to enable oversight by all relevant competent authorities.

(28) In order to serve their purpose as a tool for market monitoring, transaction reports should identify the person who has made the investment decision, as well as those responsible for its execution. In addition to the transparency regime provided for in Regulation (EU) No 236/2012 by the European Parliament and by the Council of 14 March 2012 on short selling and certain aspects of credit default swaps (10), the marking of short sales provides useful supplementary information to enable competent authorities to monitor levels of short selling. Investment firms are required to identify whether sales of shares or of debt instruments issued by a sovereign issuer are short sales. Competent authorities also need to have full access to records at all stages in the order execution process, from the initial decision to trade, through to its execution. Therefore, investment firms are required to keep records of all their transactions in financial instruments, and operators of platforms are required to keep records of all orders submitted to their systems. ESMA should coordinate the exchange of information among competent authorities to ensure that they have access to all records of transactions and orders, including those entered on platforms that operate outside their territory, in financial instruments under their supervision.

(29) Double reporting of the same information should be avoided. Reports submitted to trade repositories registered or recognised in accordance with Regulation (EU) No 648/2012 for the relevant instruments which contain all the required information for transaction reporting purposes should not need to be reported to competent authorities, but should be transmitted to them by the trade repositories. Regulation (EU) No 648/2012 should be amended to this effect.

(30) Any exchange or transmission of information by competent authorities should be in accordance with the rules on the transfer of personal data as laid down in Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data (11). Any exchange or transmission of information by ESMA should be in accordance with the rules on the transfer of personal data as laid down in Regulation (EC) No 45/2001 of the European Parliament and of the Council of 18 December 2000 on the protection of individuals with regard to the processing of personal data by the Community institutions and bodies and on the free movement of such data (12), which should be fully applicable to the processing of personal data for the purposes of this Regulation.

(31) Regulation (EU) No 648/2012 sets out the criteria according to which classes of OTC derivatives should be subject to the clearing obligation. It also prevents competitive distortions by requiring non-discriminatory access to CCPs offering clearing of OTC derivatives to trading venues and non-discriminatory access to the trade feeds of trading venues to CCPs offering clearing of OTC derivatives. As OTC derivatives are defined as derivatives contracts whose execution does not take place on a regulated market, there is a need to introduce similar requirements for regulated markets under this Regulation. Provided that ESMA has declared them subject to it, derivatives traded on regulated markets should ▐ be subject to a clearing obligation in the same way as those traded elsewhere .

(32) In addition to requirements in Directive 2004/39/EC that prevent Member States from unduly restricting access to post-trade infrastructure such as CCP and settlement arrangements, it is necessary that this Regulation removes various other commercial barriers that can be used to prevent competition in the clearing of transferable securities and money market instruments. To avoid any discriminatory practices, CCPs should accept to clear transactions executed in different trading venues, to the extent that those venues comply with the operational and technical requirements established by the CCP. Access should only be denied if such access would clearly threaten the smooth and orderly functioning of the CCP or the functioning of the financial markets in a manner that causes systemic risk .

(33) Trading venues should also be required to provide access including data feeds on a transparent and non-discriminatory basis to CCPs that wish to clear transactions executed on the trading venue except where such access would threaten the smooth or orderly functioning of markets. The right of access of a CCP to a trading venue should allow for arrangements whereby multiple CCPs are using trade feeds of the same trading venue. However, this should not lead to interoperability for derivatives clearing or create liquidity fragmentation. The removal of barriers and discriminatory practices is intended to increase competition for clearing and trading of financial instruments in order to lower investment and borrowing costs, eliminate inefficiencies and foster innovation in Union markets. The Commission should continue to closely monitor the evolution of post-trade infrastructure and should, where necessary, intervene in order to prevent competitive distortions from occurring in the internal market.

(34) The provision of services by third-country firms in the Union is subject to national regimes and requirements. Those regimes are highly differentiated and the firms authorised in accordance with them do not enjoy the freedom to provide services and the right of establishment in Member States other than the one where they are established. It is appropriate to introduce a common regulatory framework at Union level. The regime should harmonize the existing fragmented framework, ensure certainty and uniform treatment of third-country firms accessing the Union, ensure that an assessment of effective equivalence has been carried out by the Commission in relation to the regulatory and supervisory framework of third countries and should provide for a comparable level of protections to clients in the Union receiving services by third-country firms and reciprocal access to third-country markets . In applying the regime the Commission and Member States should prioritise the areas covered by the G-20 commitments and agreements with the Union's largest trading partners and should have regard to the central role that the Union plays in worldwide financial markets and ensure that the application of third-country requirements does not prevent Union investors and issuers from investing in or obtaining funding from third countries or third-country investors and issuers from investing, raising capital or obtaining other financial services in Union markets unless this is necessary for objective and evidence-based prudential reasons.

(35) The provision of services to retail clients or retail clients who have opted to be treated as professional clients within the Union should always require the establishment of a branch in the Union. The establishment of the branch should be subject to authorisation and supervision in the Union. Proper cooperation arrangements should be in place between the competent authority concerned and the competent authority in the third country. The provision of services without branches should be limited to eligible counterparties and non-opted up professional clients . It should be subject to registration by ESMA and to supervision in the third country. Proper cooperation arrangements should be in place between ESMA and the competent authorities in the third country.

(36) The provisions of this Regulation regulating the provision of services or undertaking of activities by third-country firms in the Union should not affect the possibility for persons established in the Union to receive investment services by a third-country firm in the Union at their own exclusive initiative or for Union investment firms or credit institutions to receive investment services or activities from a third-country firm or for a client to receive investment services from a third-country firm through the mediation of such a credit institution or investment firm . Where a third-country firm provides services at own exclusive initiative of a person established in the Union, the services should not be deemed as provided in the territory of the Union. Where a third-country firm solicits clients or potential clients in the Union or promotes or advertises investment services or activities together with ancillary services in the Union, it should not be deemed as a service provided at the own exclusive initiative of the client.

(37) A range of fraudulent practices have occurred in spot secondary markets in emission allowances (EUAs) which could undermine trust in the emissions trading schemes, set up by Directive 2003/87/EC, and measures are being taken to strengthen the system of EUA registries and conditions for opening an account to trade EUAs. In order to reinforce the integrity and safeguard the efficient functioning of those markets, including comprehensive supervision of trading activity, it is appropriate to complement measures taken under Directive 2003/87/EC by bringing emission allowances fully into the scope of this Directive and of Directive 2003/6/EC of the European Parliament and of the Council of 28 January 2003 on insider dealing and market manipulation (market abuse) (13) ▐.

(38) The power to adopt delegated acts in accordance with Article 290 TFEU should be delegated to the Commission in respect of the specification of certain definitions; the precise characteristics of trade transparency requirements; detailed conditions for waivers from pre-trade transparency; deferred post-trade publication arrangements; criteria for the application of the pre-trade transparency obligations for systematic internalisers; specific cost-related provisions related to the availability of market data; the criteria for granting or refusing access between trading venues and CCPs; and the further determination of conditions under which threats to investor protection, the orderly functioning and integrity of financial markets, or the stability of the whole or part of the financial system of the Union may warrant ESMA action. It is of particular importance that the Commission carry out appropriate consultations during its preparatory work, including at expert level and in particular with ESMA. The Commission, when preparing and drawing up delegated acts, should ensure a simultaneous, timely and appropriate transmission of relevant documents to the European Parliament and to the Council.

(39) In order to ensure uniform conditions for the implementation of this Regulation, implementing powers should be conferred on the Commission. Those powers should relate to the adoption of the equivalence decision concerning third-country legal and supervisory frameworks for the provision of services by third-country firms and they should be exercised in accordance with Regulation (EU) No 182/2011 of the European Parliament and of the Council of 16 February 2011 laying down the rules and general principles concerning mechanisms for control by Member States of the Commission's exercise of implementing powers (14).

(40) Since the objectives of this Regulation, namely to establish uniform requirements relating to financial instruments in relation to disclosure of trade data, reporting of transactions to the competent authorities, trading of derivatives on organised venues, non-discriminatory access to clearing, product intervention powers and powers on position management and position limits, provision of investment services or activities by third-country firms cannot be sufficiently achieved by the Member States, because, although national competent authorities are better placed to monitor market developments, the overall impact of the problems related to trade transparency, transaction reporting, derivatives trading, and bans of products and practices can only be fully perceived in a Union-wide context, and can therefore, by reason of its scale and effects, be better achieved at the Union level, the Union may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union. In accordance with the principle of proportionality, as set out in that Article, this Regulation does not go beyond what is necessary in order to achieve those objectives.

(41) Technical standards in financial services should ensure adequate protection of depositors, investors and consumers across the Union. As a body with highly specialised expertise, it would be efficient and appropriate to entrust ESMA, with the elaboration of draft regulatory and implementing technical standards which do not involve policy choices, for submission to the Commission.

(42) The Commission should adopt the draft regulatory technical standards developed by ESMA regarding the content and specifications of transaction reports, specifying the types of derivative contracts which have a direct, substantial and foreseeable effect within the Union, specifying whether a class of derivatives declared subject to the clearing obligation under Regulation (EU) No 648/2012 or a relevant subset thereof should be traded only on organised trading venues, regarding the liquidity criteria for derivatives to be considered subject to an obligation to trade on organised trading venues, and concerning the information that the applicant third-country firm should provide to ESMA in its application for registration . The Commission should adopt those draft regulatory technical standards by means of delegated acts pursuant to Article 290 TFEU and in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010 . ▐

(44) The application of the requirements in this Regulation should be deferred in order to align applicability with the application of the transposed rules of the recast Directive and to establish all essential implementing measures. The entire regulatory package should then be applied from the same point in time. Only the application of the empowerments for implementing measures should not be deferred so that the necessary steps to draft and adopt these implementing measures can start as early as possible.

(45) This Regulation respects the fundamental rights and observes the principles recognised in particular by the Charter of Fundamental Rights of the European Union, in particular the right to the protection of personal data (Article 8), the freedom to conduct a business (Article 16), the right to consumer protection (Article 38), the right to an effective remedy and to a fair trial (Article 47), and the right not to be tried or punished twice for the same offence (Article 50), and has to be applied in accordance with those rights and principles.

(45a) The European Data Protection Supervisor has been consulted,

HAVE ADOPTED THIS REGULATION:

TITLE I

SUBJECT MATTER, SCOPE AND DEFINITIONS

Article 1

Subject matter and scope

1. This Regulation establishes uniform requirements in relation to the following:

(a) disclosure of trade data to the public;

(b) reporting of transactions to the competent authorities;

(c) trading of derivatives on organised venues;

(d) non-discriminatory access to clearing and non-discriminatory access to trading in benchmarks;

(e) product intervention powers of competent authorities and ESMA and powers of ESMA on position management and position limits;

(f) provision of investment services or activities without a branch by third-country firms.

2. This Regulation applies to credit institutions authorised under Directive 2006/48/EC and investment firms ▐ authorised under Directive …/…/EU [new MiFID] where the credit institution or investment firm is providing one or more investment services and/or performing investment activities, and to market operators .

3. Title V of this Regulation also applies to all financial counterparties as defined in Article [2(8)] of Regulation (EU) No 648/2012 and all non-financial counterparties falling under Article 10(1)(b) of that Regulation.

4. Title VI of this Regulation also applies to central counterparties (CCPs) and persons with proprietary rights to benchmarks.

4a. Title VII of this Regulation also applies to all financial counterparties as defined in Article 2(8) of Regulation (EU) No 648/2012.

4b. Title VIII of this Regulation applies to third-country firms providing investment services or activities within a Member State other than through a branch in a Member State.

Article 2

Definitions

1. For the purposes of this Regulation, the following definitions shall apply:

(1) ‘investment firm’ means any legal person whose regular occupation or business is the provision of one or more investment services to third parties and/or the performance of one or more investment activities on a professional basis; Member States may include in the definition of investment firms undertakings which are not legal persons, provided that: (a) their legal status ensures a level of protection for third parties' interests equivalent to that afforded by legal persons, and (b) they are subject to equivalent prudential supervision appropriate to their legal form. However, where a natural person provides services involving the holding of third parties' funds or transferable securities, that person may be considered as an investment firm for the purposes of this Regulation and of Directive …/…/EU [new MiFID] only if, without prejudice to the other requirements imposed in Directive …/…/EU [new MiFID], in this Regulation and in Directive …/…/EU [new CRD], he complies with the following conditions: (a) the ownership rights of third parties in instruments and funds must be safeguarded, especially in the event of the insolvency of the firm or of its proprietors, seizure, set-off or any other action by creditors of the firm or of its proprietors; (b) the firm must be subject to rules designed to monitor the firm's solvency and that of its proprietors; (c) the firm's annual accounts must be audited by one or more persons empowered, under national law, to audit accounts; (d) where the firm has only one proprietor, he must make provision for the protection of investors in the event of the firm's cessation of business following his death, his incapacity or any other such event;

(2) ‘credit institution’ means credit institution within the meaning of point (1) of Article 4 of Directive 2006/48/EC;

(2a) 'multilateral system' means a system that brings together or facilitates the bringing together of multiple buying and selling interests in financial instruments, irrespective of the actual number of orders that are executed in the resulting transactions;

(2b) 'bilateral system' means a system that brings together or facilitates the bringing together of buying and selling interests in financial instruments whereby the investment firm operating the system only executes client orders by dealing on own account;

(2c) 'over-the-counter trading' means bilateral trading which is carried out by an eligible counterparty on its own account, outside a trading venue or a systematic internaliser, on an occasional and irregular basis with eligible counterparties and always at large in scale sizes;

(3) ‘systematic internaliser’ means an investment firm which, on an organised, regular and systematic basis, deals on own account by executing client orders outside a regulated market, a multilateral trading facility or an organised trading facility, in a bilateral system ;

(4) ‘market operator’ means a person or persons who manages and/or operates the business of a regulated market. The market operator may be the regulated market itself;

(5) ‘regulated market’ means a multilateral system operated and/or managed by a market operator, which brings together or facilitates the bringing together of multiple third-party buying and selling interests in financial instruments – in the system and in accordance with its non-discretionary rules – in a way that results in a contract, in respect of the financial instruments admitted to trading under its rules and/or systems, and which is authorised and functions regularly and in accordance with the provisions of Title III of Directive …/…/EU [new MiFID];

(6) ‘multilateral trading facility’ means a multilateral system, operated by an investment firm or a market operator, which brings together multiple third-party buying and selling interests in financial instruments – in the system and in accordance with non-discretionary rules – in a way that results in a contract in accordance with the provisions of Title II of Directive …/…/EU [new MiFID];

(7) ‘organised trading facility’ means a multilateral system or facility, which is not a regulated market, a multilateral trading facility or a central counterparty , operated by an investment firm or a market operator, in which multiple third-party buying and selling interests in bonds, structured finance products, emission allowances or derivatives are able to interact in the system in a way that results in a contract in accordance with the provisions of Title II of Directive …/…/EU [new MiFID];

(8) ‘financial instrument’ means those instruments specified in Section C of Annex I to Directive …/…/EU [new MiFID];

(9) ‘transferable securities’ means those classes of securities which are negotiable on the capital market, with the exception of instruments of payment, such as: (a) shares in companies and other securities equivalent to shares in companies, partnerships or other entities, and depositary receipts in respect of shares; (b) bonds or other forms of securitised debt, including depositary receipts in respect of such securities; (c) any other securities giving the right to acquire or sell any such transferable securities or giving rise to a cash settlement determined by reference to transferable securities, currencies, interest rates or yields, commodities or other indices or measures;

(10) ‘depositary receipts’ means those securities which are negotiable on the capital market and which represent ownership of the securities of a non-domiciled issuer while being able to be admitted to trading on a regulated market and traded independently of the securities of the non-domiciled issuer;

(11) ‘exchange-traded funds’ means funds at least one unit or share class of which are traded throughout the day on at least one regulated market, a multilateral trading facility or organised trading facility with at least one market maker which takes action to ensure that the stock exchange value of its units or shares does not significantly vary from their net asset value and where applicable its indicative net asset value ;

(12) ‘certificates’ means those securities which are negotiable on the capital market and which in case of a repayment of investment by the issuer are ranked above shares but below unsecured bond instruments and other similar instruments;

(13) ‘structured finance products’ means those securities created to securitise and transfer credit risk associated with a pool of financial assets entitling the security holder to receive regular payments that depend on the cash flow from the underlying assets;

(14) ‘derivatives’ means those financial instruments defined in paragraph 9(c) of Directive …/…/EU [new MiFID] and referred to in Annex I, Section C (4) to (10) thereto;

(15) ‘commodity derivatives’ means those financial instruments defined in paragraph 9(c) of Directive …/…/EU [new MiFID] relating to a commodity or an underlying referred to in points (5), (6), (7) or (10) of Section C of Annex I thereto;

(16) ‘actionable indication of interest’ means a message from one participants to another in a trading system about available trading interest that contains all necessary information to agree on a trade;

(17) ‘competent authority’ means the authority, designated by each Member State in accordance with Article 69 of Directive …/…/EU [new MiFID], unless otherwise specified in that Directive;

(18) ‘approved publication arrangement’ means a person authorised under the provisions established in Directive …/…/EU [new MiFID] to provide the service of publishing trade reports on behalf of trading venues or investment firms pursuant to Articles 5, 9, 11 and 12 of this Regulation;

(19) ‘consolidated tape provider’ means a person authorised under the provisions established in Directive …/…/EU [new MiFID] to provide the service of collecting trade reports for financial instruments listed in Articles 5, 6, 11 and 12 of this Regulation from regulated markets, multilateral trading facilities, organised trading facilities and approved publication arrangements and consolidating them into a continuous electronic live data stream providing real-time and, where provided for in Article 66(1) and (2) of Directive …/…/EU [new MiFID], delayed price and volume data per financial instrument;

(20) ‘approved reporting mechanism’ means a person authorised under the provisions established in Directive …/…/EU [new MiFID] to provide the service of reporting details of transactions to competent authorities or ESMA on behalf of investment firms;

(21) ‘management body’ means the governing body of an investment firm, market operator or of a data reporting services provider, comprising the supervisory and the managerial functions, which has the ultimate decision-making authority and is empowered to set the investment firm's, the market operator's or the data services provider's strategy, objectives and overall direction, including persons who effectively direct the business of the entity; ▐

(24) 'benchmark index ' means any tradable or broadly used commercial index or published figure calculated by the application of a formula to the value of one or more underlying assets or prices, including estimated prices, interest rates or other values or surveys, by reference to which the amount payable under a financial instrument is determined , which acts as the standard measure of the performance of the relevant assets or class or group of assets ;

(25) 'trading venue' means a regulated market, a multilateral trading facility or an organised trading facility;

(26) ‘CCP’ means a CCP within the meaning of point (1) of Article 2 ▐ of Regulation (EU) No 648/2012.

(26a) 'interoperability arrangement' means an interoperability arrangement within the meaning of point (12) of Article 2 of Regulation (EU) No 648/2012.

(27) 'investment services and activities' means the services and activities within the meaning of point (1) of Article 4(2) of Directive …/…/EU [new MiFID].

(28) 'third-country financial institution' means an entity, the head office of which is established in a third country, that is authorised or licensed under the law of that third country to carry on any of the activities listed in Directive 2006/48/EC, Directive …/…/EU [new MiFID], Directive 2009/138/EC, Directive 2009/65/EC, Directive 2003/41/EC or Directive 2011/61/EU.

(28a) 'third-country firm' means a third-country firm within the meaning of point (33d) of Article 4(2) of Directive …/…/EU [new MiFID ]

(29) 'wholesale energy product' means those contracts and derivatives within the meaning of Article 2(4) of Regulation (EU) No 1227/2011 of the European Parliament and of the Council of 25 October 2011 on wholesale energy market integrity and transparency (15) .

(29a) 'primary issuance' means a transaction in instruments with bespoke material terms designed for the specific requirements of financial or non-financial counterparties which would be classified as eligible counterparties or professional clients according to Article 30 of Directive …/…/EU [new MiFID] and Annex II thereto.

2 The definitions provided in Article 4(2) of Directive …/…/EU [new MiFID] also apply to this Regulation .

3. The Commission shall be empowered to adopt delegated acts in accordance with Article 41 , after consulting ESMA, specifying certain technical elements of the definitions laid down in points (3), (7), (10) to (16), (18) to (26a), (28) and (29) of paragraph 1 to adjust them to market development.

Article 2a

Obligation to trade over the counter (OTC) through systematic internalisers

1. All transactions in shares, depositary receipts, exchange-traded funds, certificates and other similar financial instruments, which are not intragroup transactions as referred to in Article 3 of Regulation (EU) No 648/2012, which meet the thresholds in Article 13 of this Regulation, and which are not concluded on a regulated market or a multilateral trading facility (MTF) shall be concluded through a systematic internaliser unless the transaction involves the primary issuance of the instrument. This requirement shall not apply to transactions which are large in scale as determined in accordance with Article 4.

2. All transactions in bonds, structured finance products admitted to trading on a regulated market or for which a prospectus has been published, emission allowances and derivatives which are eligible for clearing or which are admitted to trading on a regulated market or are traded on an MTF or an organised trading facility (OTF) and which are not subject to the trading obligation under Article 26, which are not concluded on a regulated market, an MTF, an OTF or a third-country trading venue assessed as equivalent in accordance with Article 26(4), and which meet the thresholds in Article 17, shall be concluded through a systematic internaliser unless the transaction involves the primary issuance of the instrument. This requirement shall not apply to transactions which are large in scale as determined in accordance with Article 8.

3. Where a financial instrument listed in paragraph 1 or 2 is admitted to trading on a regulated market or is traded on an MTF or an OTF and no systematic internaliser is available, transactions may be carried out OTC other than through a systematic internaliser, the characteristics of which are that the transaction is ad hoc and irregular, where:

(a) the parties to the transaction are eligible counterparties or professional clients; and:

(b) the transaction is large in scale; or

(c) there is not a liquid market for the bond or class of bond, as determined in accordance with Articles 7, 8, 13 and 17.

TITLE II

TRANSPARENCY FOR TRADING VENUES WITH MULTILATERAL SYSTEMS

CHAPTER 1

TRANSPARENCY FOR EQUITY INSTRUMENTS

Article 3

Pre-trade transparency requirements for trading venues in respect of shares, depositary receipts, exchange-traded funds, certificates and other similar financial instruments

1. Regulated markets and investment firms and market operators operating an MTF ▐ shall make public current bid and offer prices and the depth of trading interests at those prices which are advertised through their systems for shares, depositary receipts, exchange-traded funds, certificates and other similar financial instruments admitted to trading on a regulated market or which are traded on an MTF ▐. This requirement shall also apply to actionable indications of interests. Regulated markets and investment firms and market operators operating an MTF ▐ shall make this information available to the public on a continuous basis during normal trading hours.

2. Regulated markets and investment firms and market operators operating an MTF ▐ shall give access, on reasonable commercial terms and on a non-discriminatory basis, to the arrangements they employ for making public the information under the first paragraph to investment firms which are obliged to publish their quotes in shares, depositary receipts, exchange-traded funds, certificates and other similar financial instruments pursuant to Article 13.

Article 4

▐ Waivers for equity instruments

1. Competent authorities shall be able to waive the obligation for regulated markets and investment firms and market operators operating an MTF ▐ to make public the information referred to in Article 3(1) based on the market model or the type and size of orders in the cases defined in accordance with paragraph 3. In particular, the competent authorities shall be able to waive the obligation in respect of : ▐

— orders that are large in scale compared with normal market size for the share, depositary receipt, exchange-traded fund, certificate or other similar financial instrument concerned, or

— a trading methodology by which the price is determined in accordance with a reference price generated by another system, where that reference price is widely published and is generally regarded by market participants as a reliable reference price .

2. Before granting a waiver in accordance with paragraph 1, competent authorities shall notify ESMA and other competent authorities of the intended use of each individual waiver request and provide an explanation regarding its functioning. Notification of the intention to grant a waiver shall be made not less than four months before the waiver is intended to take effect. Within two months following receipt of the notification, ESMA shall issue a non-binding opinion to the competent authority in question assessing the compatibility of each waiver with the requirements established in paragraph 1 and specified in the delegated act adopted pursuant to paragraphs 3(b) and (c). A competent authority shall only grant waivers upon a non-binding opinion by ESMA. Where that competent authority grants a waiver and a competent authority of another Member State disagrees with this, that competent authority may refer the matter back to ESMA, which may act in accordance with the powers conferred on it under Article 19 of Regulation (EU) No 1095/2010. ESMA shall monitor the application of the waivers and shall submit an annual report to the Commission on how they are applied in practice.

2a. A competent authority may withdraw a waiver granted under paragraph 1, as specified pursuant to paragraph 3 if it observes that the waiver is being used in a way that deviates from its original purpose or if it believes that the waiver is being used to circumvent the rules established in this Article.

Before withdrawing the waiver, and as soon as possible, the competent authority shall notify ESMA and other competent authorities of its intention providing full reasons. Within one month of receipt of the notification, ESMA shall issue a non-binding opinion to the competent authority in question. After receiving the opinion, the competent authority shall make its decision effective.

3. The Commission shall adopt, by means of delegated acts in accordance with Article 41, measures specifying:

(a) the range of bid and offers or designated market-maker quotes, and the depth of trading interest at those prices, to be made public for each class of financial instrument concerned;

(b) the size or type of orders for which pre-trade disclosure may be waived under paragraph 1 for each class of financial instrument concerned;

(c) the detailed arrangements for applying the pre-trade disclosure obligation in Article 3 to trading methods operated by regulated markets and MTFs which conclude transactions ▐ by periodic auction for each class of financial instrument concerned or through negotiated transactions .

4. Waivers granted by competent authorities in accordance with Article 29(2) and Article 44(2) of Directive 2004/39/EC and Articles 18, 19 and 20 of Regulation (EC) No 1287/2006 before … (16) shall be reviewed by ESMA by … (17). ESMA shall issue an opinion to the competent authority in question assessing the continued compatibility of each of those waivers with the requirements established in this Regulation and any delegated act based on this Regulation.

Article 5

Post-trade transparency requirements for trading venues in respect of shares, depositary receipts, exchange-traded funds, certificates and other similar financial instruments

1. Regulated markets and investment firms and market operators operating an MTF ▐ shall make public through an approved publication arrangement (APA) the price, volume and time of the transactions executed in respect of shares, depositary receipts, exchange-traded funds, certificates and other similar financial instruments admitted to trading on a regulated market or which are traded on an MTF ▐. Regulated markets and investment firms and market operators operating an MTF ▐ shall make details of all such transactions public as close to real-time as is technically possible.

2. Regulated markets and investment firms and market operators operating an MTF ▐ shall give effective access, on reasonable commercial terms and on a non-discriminatory basis, to the arrangements they employ for making public the information under paragraph 1 to investment firms which are obliged to publish the details of their transactions in shares, depositary receipts, exchange-traded funds, certificates and other similar financial instruments pursuant to Article 19.

Article 6

Authorisation of deferred publication

1. Competent authorities shall be able to authorise regulated markets to provide for deferred publication of the details of transactions based on their type or size. In particular, competent authorities may authorise deferred publication in respect of transactions that are large in scale compared with the normal market size for that share, depositary receipt, exchange-traded fund, certificate or other similar financial instrument or that class of share, depositary receipt, exchange-traded fund, certificate or other similar financial instrument. Regulated markets and investment firms and market operators operating an MTF ▐ shall obtain the competent authority's prior approval of proposed arrangements for deferred trade-publication, and shall clearly disclose these arrangements to market participants and the public. ESMA shall monitor the application of these arrangements for deferred trade-publication and shall submit an annual report to the Commission on how they are applied in practice.

Where a competent authority authorises deferred publication and a competent authority of another Member State disagrees with this or disagrees with the effective application of the authorisation granted, that competent authority may refer the matter back to ESMA, which may act in accordance with the powers conferred on it under Article 19 of Regulation (EU) No 1095/2010.

2. The Commission shall adopt, by means of delegated acts in accordance with Article 41, measures specifying:

(a) the details that need to be specified by regulated markets, investment firms, including systematic internalisers and investment firms and regulated markets operating a MTF ▐ in the information to be made available to the public for each class of financial instrument concerned;

(b) the conditions for authorising a regulated market, an investment firm, including a systematic internaliser or an investment firm or market operator operating an MTF ▐ for a deferred publication of trades and the criteria to be applied when deciding the transactions for which, due to their size, or the type , including liquidity profile, of the share, depositary receipt, exchange-traded fund, certificate or other similar financial instrument involved, deferred publication is allowed for each class of financial instrument concerned.

CHAPTER 2

TRANSPARENCY FOR NON-EQUITY INSTRUMENTS

Article 7

Pre-trade transparency requirements for trading venues in respect of bonds, structured finance products, emission allowances and derivatives

1. Regulated markets and investment firms and market operators operating an MTF or an OTF based on the trading system operated shall make public prices and the depth of trading interests at those prices for orders or quotes advertised through their systems for bonds and structured finance products admitted to trading on a regulated market or for which a prospectus has been published and that are sufficiently liquid , emission allowances and for derivatives which are subject to the trading obligation referred to in Article 24 . This requirement shall also apply to actionable indications of interests. Regulated markets and investment firms and market operators operating an MTF or an OTF shall make this information available to the public on a continuous basis during normal trading hours. That publication obligation does not apply to those derivative transactions of non-financial counterparties which are objectively measurable as reducing risks directly relating to the commercial activity or treasury financing activity of the non-financial counterparty or of that group.

The requirements set out in the first subparagraph shall be calibrated to the size of issue and transaction size and shall take into account the interests of both issuers and investors and financial stability. The requirements set out in this Article shall only apply to those financial instruments which are determined to be sufficiently liquid or for which there is a liquid market. Where transactions are negotiated between eligible counterparties and professional clients through voice negotiation pre-trade indicative prices must be published as close to the transaction price as reasonably practicable.

2. Regulated markets and investment firms and market operators operating an MTF or an OTF shall give effective access, on reasonable commercial terms and on a non-discriminatory basis, to the arrangements they employ for making public the information referred to in the first paragraph to investment firms which are obliged to publish their quotes in bonds, structured finance products, emission allowances and derivatives pursuant to Article 17.

Article 8

▐ Waivers relating to non-equity instruments

1. Competent authorities shall be able to waive the obligation for regulated markets and investment firms and market operators operating an MTF or an OTF to make public the information referred to in Article 7(1) for specific sets of products based on the ▐ liquidity and other criteria defined in accordance with paragraph 4.

2. Competent authorities shall be able to waive the obligation for regulated markets and investment firms and market operators operating an MTF or an OTF to make public the information referred to in Article 7(1) based on the type and size of orders and method of trading in accordance with paragraph 4 of this Article. In particular, the competent authorities shall be able to waive the obligation in respect of orders that are large in scale compared with normal market size for the bond, structured finance product, emission allowance or derivative or type of bond, structured finance product, emission allowance or derivative in question.

3. Before granting a waiver in accordance with paragraphs 1 and 2, competent authorities shall notify ESMA and other competent authorities of its intended use and provide an explanation regarding its functioning. Notification of the intention to grant a waiver shall be made not less than four months before the waiver is intended to take effect. Within two months following receipt of the notification, ESMA shall issue a non-binding opinion to the competent authority in question assessing the compatibility of each individual waiver request with the requirements established in paragraphs 1 and 2 and specified in the delegated act adopted pursuant to paragraph 4(b). A competent authority shall only grant waivers upon a non-binding opinion by ESMA. Where that competent authority grants a waiver and a competent authority of another Member State disagrees with this, that competent authority may refer the matter back to ESMA, which may act in accordance with the powers conferred on it under Article 19 of Regulation (EU) No 1095/2010. ESMA shall monitor the application of the waivers and shall submit an annual report to the Commission on how they are applied in practice.

3a. A competent authority may withdraw a waiver granted under paragraph 1, as specified pursuant to paragraph 4, if it observes that the waiver is being used in a way that deviates from its original purpose or if it believes that the waiver is being used to circumvent the rules established in this Article.

Before withdrawing the waiver, and as soon as possible, the competent authorities shall notify ESMA and other competent authorities of its intention, providing full reasons. Within one month of receipt of the notification, ESMA shall issue a non-binding opinion to the competent authority in question. After receiving the opinion, the competent authority shall make its decision effective.

3b. Where the liquidity of a bond or class of bonds falls below the threshold determined in accordance with paragraph 3c, the obligations referred to in Article 7(1) may be temporarily suspended by a competent authority responsible for supervising one or more trading venues on which the financial instrument is traded. This threshold shall be defined based on objective criteria.

The suspension shall be valid for an initial period not exceeding three months from the date of its publication on the website of the relevant competent authority. The suspension may be renewed for further periods not exceeding three months at a time if the grounds for the suspension continue to be applicable. If the suspension is not renewed after any three-month period, it shall automatically expire.

Before suspending or renewing the suspension under this paragraph, the relevant competent authority shall notify ESMA of its proposal, providing full reasons. ESMA shall issue an opinion to the competent authority as soon as practicable on whether in its view the conditions referred to in this paragraph have arisen.

3c. ESMA shall develop draft regulatory technical standards specifying the parameters and methods for calculating the threshold of liquidity referred to in paragraph 1.

ESMA shall submit those draft regulatory technical standards to the Commission by … (18).

Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with the procedure laid down in Articles 10 to 14 of Regulation (EU) No 1095/2010.

The parameters and methods for Member States to calculate the threshold shall be set in such a way that when the threshold is reached, it represents a significant decline in turnover on trading venues supervised by the notifying authority relative to the average level of turnover on those venues for the financial instrument concerned.

4. The Commission shall adopt, by means of delegated acts in accordance with Article 41, measures specifying:

(a) the range of orders or quotes, the prices and the depth of trading interest at those prices, to be made public for each class of financial instrument concerned in accordance with Article 7(1);

(aa) the calibration of the requirements in Article 7(1) and Article 17(1) for the size of issue and transaction size and for the publication of pre-trade indicative prices in negotiated transactions; and

(b) the conditions under which pre-trade disclosure may be waived for each class of financial instrument concerned in accordance with paragraphs 1 and 2, based on the following: ▐ (iii) the liquidity profile, including the number and type of market participants in a given market and any other relevant criteria for assessing liquidity for a particular financial instrument ; (iv) the size or type of orders , in particular to allow for appropriate differentiation between retail and other markets, and the size and type of an issue of a financial instrument.

▐

Article 9

Post-trade transparency requirements for trading venues in respect of bonds, structured finance products, emission allowances and derivatives

1. Regulated markets and investment firms and market operators operating an MTF or an OTF shall make public, through an APA, the price, volume and time of the transactions executed in respect of bonds and structured finance products admitted to trading on a regulated market or for which a prospectus has been published, emission allowances and for derivatives admitted to trading on a regulated market or which are traded on an MTF or an OTF. Regulated markets and investment firms and market operators operating an MTF or an OTF shall make details of all such transactions public as close to real-time as is technically possible.

2 Regulated markets and investment firms and market operators operating an MTF or an OTF shall give access, on reasonable commercial terms and on a non-discriminatory basis, to the arrangements they employ for making public the information under the first paragraph to investment firms which are obliged to publish the details of their transactions in bonds, structured finance products, emission allowances and derivatives pursuant to Article 20.

Article 10

Authorisation of deferred publication

1. Competent authorities shall be able to authorise regulated markets and investment firms and market operators operating an MTF or an OTF to provide for deferred publication of the details of transactions based on their type or size and the liquidity profile of the financial instrument . In particular, the competent authorities may authorise the deferred publication in respect of transactions that are over EUR 100 000 or are otherwise large in scale compared with the normal market size for that bond, structured finance product, emission allowance or derivative or that class of bond, structured finance product, emission allowance or derivative or where liquidity falls below the threshold determined in accordance with Article 8(3b) .

2. Regulated markets and investment firms and market operators operating an MTF or an OTF shall obtain the competent authority's prior approval of proposed arrangements for deferred trade-publication, and shall clearly disclose these arrangements to market participants and the investing public. ESMA shall monitor the application of these arrangements for deferred trade-publication and shall submit an annual report to the Commission on how they are used in practice.

3. The Commission shall adopt, by means of delegated acts in accordance with Article 41, measures specifying:

(a) the details that need to be specified by regulated markets, investment firms, including systematic internalisers and investment firms and regulated markets operating a MTF or an OTF in the information to be made available to the public for each class of financial instrument concerned;

(b) the conditions for authorising for each class of financial instrument concerned a deferred publication of trades for a regulated market, an investment firm, including a systematic internaliser or an investment firm or market operator operating an MTF or an OTF and the criteria to be applied when deciding the transactions for which, due to their size or the type , including liquidity profile, of the bond, structured finance product, emission allowance or derivative involved, deferred publication and/or the omission of the volume of the transaction and the aggregation of transactions is allowed.

CHAPTER 3

OBLIGATION TO OFFER TRADE DATA ON A SEPARATE AND REASONABLE COMMERCIAL BASIS

Article 11

Obligation to make pre- and post-trade data available separately

1. Regulated markets and market operators and investment firms operating MTFs and , where applicable, OTFs shall make the information published in accordance with Articles 3 to 10 available to the public by offering pre- and post-trade transparency data separately.

2. The Commission shall, after consulting ESMA, adopt delegated acts in accordance with Article 41 specifying the offering pre- and post-trade transparency data, including the level of disaggregation of the data to be made available to the public as referred to in paragraph 1.

Article 12

Obligation to make pre- and post-trade data available on a reasonable commercial basis

1 Regulated markets, MTFs and , where applicable, OTFs shall make the information published in accordance with Articles 3 to 10 available to the public on a reasonable commercial basis and ensure effective non-discriminatory access to the information . The information shall be made available free of charge 15 minutes after the publication of a transaction.

2. The Commission may adopt delegated acts in accordance with Article 41 clarifying what constitutes a reasonable commercial basis to make information public as referred to in paragraph 1.

TITLE III

TRANSPARENCY FOR SYSTEMATIC INTERNALISERS AND INVESTMENT FIRMS TRADING OTC

Article 13

Obligation for investment firms to make public firm quotes

1. Systematic internalisers in shares, depositary receipts, exchange-traded funds, certificates and other similar financial instruments shall publish a firm quote in those shares, depositary receipts, exchange-traded funds, certificates and other similar financial instruments admitted to trading on a regulated market or traded on an MTF ▐ for which they are systematic internalisers and for which there is a liquid market. In the case of shares, depositary receipts, exchange-traded funds, certificates and other similar financial instruments for which there is not a liquid market, systematic internalisers shall disclose quotes to their clients on request.

2. This Article and Articles 14, 15 and 16 shall apply to systematic internalisers when dealing for sizes up to standard market size. Systematic internalisers that only deal in sizes above standard market size shall not be subject to the provisions of this Article.

3. Systematic internalisers may decide the size or sizes at which they will quote. The minimum quote size shall at least be the equivalent of 10 % of the standard market size of a share, depositary receipt, exchange-traded fund, certificate or other similar financial instrument. For a particular share, depositary receipt, exchange-traded fund, certificate or other similar financial instrument each quote shall include a firm bid and offer price or prices for a size or sizes which could be up to standard market size for the class of shares, depositary receipts, exchange-traded funds, certificates or other similar financial instruments to which the financial instrument belongs. The price or prices shall also reflect the prevailing market conditions for that share, depositary receipt, exchange-traded fund, certificate or other similar financial instrument.

4. Shares, depositary receipts, exchange-traded funds, certificates and other similar financial instruments shall be grouped in classes on the basis of the arithmetic average value of the orders executed in the market for that financial instrument. The standard market size for each class of shares, depositary receipts, exchange-traded funds, certificates and other similar financial instruments shall be a size representative of the arithmetic average value of the orders executed in the market for the financial instruments included in each class.

5. The market for each share, depositary receipt, exchange-traded fund, certificate or other similar financial instrument shall be comprised of all orders executed in the European Union in respect of that financial instrument excluding those large in scale compared to normal market size.

6. The competent authority of the most relevant market in terms of liquidity as defined in Article 23 for each share, depositary receipt, exchange-traded fund, certificate and other similar financial instrument shall determine at least annually, on the basis of the arithmetic average value of the orders executed in the market in respect of that financial instrument, the class to which it belongs. This information shall be made public to all market participants and communicated to ESMA which shall publish the information on its website .

7. In order to ensure the efficient valuation of shares, depositary receipts, exchange-traded funds, certificates and other similar financial instruments and maximises the possibility of investment firms of obtaining the best deal for their clients the Commission shall adopt, by means of delegated acts in accordance with Article 41, measures specifying the elements related to the publication of a firm quote as referred to in paragraph 1 and to the standard market size as referred to in paragraph 2.

Article 14

Execution of client orders

1. Systematic internalisers shall make public their quotes on a regular and continuous basis during normal trading hours. They may update their quotes at any time. They shall also be allowed, under exceptional market conditions, to withdraw their quotes.

The quote shall be made public in a manner which is easily accessible to other market participants on a reasonable commercial basis.

2. Systematic internalisers shall, while complying with the provisions set down in Article 27 of Directive …/…/EU [new MiFID], execute the orders they receive from their clients in relation to the shares, depositary receipts, exchange-traded funds, certificates and other similar financial instruments for which they are systematic internalisers at the quoted prices at the time of reception of the order.

However, they may execute those orders at a better price in justified cases provided that this price falls within a public range close to market conditions.

3. Systematic internalisers may also execute orders they receive from their professional clients at prices different than their quoted ones without having to comply with the requirements established in paragraph 2, in respect of transactions where execution in several securities is part of one transaction or in respect of orders that are subject to conditions other than the current market price.

4. Where a systematic internaliser quoting only one quote or whose highest quote is lower than the standard market size receives an order from a client of a size bigger than its quotation size, but lower than the standard market size, it may decide to execute that part of the order which exceeds its quotation size, provided that it is executed at the quoted price, except where otherwise permitted under the conditions of the previous two paragraphs. Where the systematic internaliser is quoting in different sizes and receives an order between those sizes, which it chooses to execute, it shall execute the order at one of the quoted prices in compliance with the provisions of Article 28 of Directive …/…/EU [new MiFID], except where otherwise permitted under the conditions of paragraphs 2 and 3 of this Article.

5. In order to ensure the efficient valuation of shares, depositary receipts, exchange-traded funds, certificates and other similar financial instruments and maximises the possibility of investment firms of obtaining the best deal for their clients the Commission shall adopt delegated acts in accordance with Article 41 specifying the criteria specifying when prices fall within a public range close to market conditions as referred to in paragraph 2.

6. The Commission shall be empowered to adopt delegated acts in accordance with Article 41, after consulting ESMA, clarifying what constitutes a reasonable commercial basis to make quotes public as referred to in paragraph 1.

Article 15

Obligations of competent authorities

The competent authorities shall check the following:

(a) that investment firms regularly update bid and offer prices published in accordance with Article 13 and maintain prices which reflect the prevailing market conditions;

(b) that investment firms comply with the conditions for price improvement laid down in Article 14(2).

Article 16

Access to quotes

1 Systematic internalisers may decide, on the basis of their commercial policy and in an objective non-discriminatory way, the investors to whom they give access to their quotes. To that end there shall be clear standards for governing access to their quotes. Systematic internalisers may refuse to enter into or discontinue business relationships with investors on the basis of commercial considerations such as the investor credit status, the counterparty risk and the final settlement of the transaction.

2. In order to limit the risk of exposure to multiple transactions from the same client, systematic internalisers may limit in a non-discriminatory way the number of transactions from the same client which they undertake to enter at the published conditions. They may also, in a non-discriminatory way and in accordance with the provisions of Article 28 of Directive …/…/EU [new MiFID], limit the total number of transactions from different clients at the same time provided that this is allowable only where the number and/or volume of orders sought by clients considerably exceeds the norm.

3. In order to ensure the efficient valuation of shares, depositary receipts, exchange-traded funds, certificates and other similar financial instruments and maximises the possibility of investment firms of obtaining the best deal for their clients the Commission shall , after consulting ESMA, adopt delegated acts in accordance with Article 41 specifying:

(a) the criteria specifying when a quote is published on a regular and continuous basis and is easily accessible as well as the means by which investment firms may comply with their obligation to make public their quotes, which shall include the following possibilities: (i) through the facilities of any regulated market which has admitted the instrument in question to trading; (ii) through an APA; (iii) through proprietary arrangements;

(b) the criteria specifying those transactions where execution in several securities is part of one transaction or orders that are subject to conditions other than current market price;

(c) the criteria specifying what can be considered as exceptional market circumstances that allow for the withdrawal of quotes as well as conditions for updating quotes;

(d) the criteria specifying when the number and/or volume of orders sought by clients considerably exceeds the norm as referred to in paragraph 2;

(e) the criteria specifying when prices fall within a public range close to market conditions as referred to in Article 14(2).

Article 17

Obligation to publish firm quotes in bonds, structured finance products, emission allowance and derivatives

1. Systematic internalisers shall provide firm quotes in bonds and structured finance products admitted to trading on a regulated market or for which a prospectus has been published, emission allowances and derivatives which are clearing-eligible or are admitted to trading on a regulated market or are traded on an MTF or an OTF for which they are systematic internalisers and for which there is a liquid market as determined in accordance with Articles 7 and 8, when the following conditions are fulfilled:

(a) they are prompted for a quote by a client of the systematic internaliser;

(b) they agree to provide a quote.

1a. The obligation in paragraph 1 shall be calibrated in accordance with Article 7(1) and Article 8(4)(aa) and may be waived where the conditions specified in Article 8(4)(b) are met.

1b. Systematic internalisers may update their quotes at any time in response to changes in market conditions or to correct errors. They may also, under exceptional market conditions, withdraw their quotes.

2. Systematic internalisers shall make the firm quotes provided pursuant to paragraph 1 available to other clients of the investment firm where the quoted size is at or below a size specific to the financial instrument in an objective non-discriminatory way on the basis of their commercial policy. Systematic internalisers may refuse to enter into or discontinue business relationships with investors on the basis of commercial considerations such as the investor credit status, the counterparty risk and settlement risk.

3. Systematic internalisers shall undertake to enter into transactions with any other client to whom the quote is made available under their commercial policy when the quoted size is at or below a size specific to the financial instrument.

4. Systematic internalisers may establish non-discriminatory and transparent limits on the number of transactions they undertake to enter into with clients pursuant to any given quote.

5. The quotes made pursuant to paragraph 1 and at or below the size mentioned in paragraphs 2 and 3 shall be made public in a manner which is easily accessible to other market participants on a reasonable commercial basis.

6. The quotes shall be such as to ensure that the firm complies with its obligations under Article 27 of Directive …/…/EU [new MiFID], where applicable, and shall reflect prevailing market conditions in relation to prices at which transactions are concluded for the same or similar instruments on regulated markets, MTFs or OTFs.

Article 18

Monitoring by ESMA

1. Competent authorities and ESMA shall monitor the application of Article 17 regarding the sizes at which quotes are made available to clients of the investment firm and made available to other market participants relative to other trading activity of the firm, and the degree to which the quotes reflect prevailing market conditions in relation to transactions in the same or similar instruments taking place on regulated markets, MTFs, or OTFs. By .… (19) , ESMA shall report to the Commission on the application of this Article . In the event of significant quoting and trading activity just beyond the threshold mentioned in Article 17(3) or outside prevailing market conditions, ESMA shall report to the Commission before that date.

2. The Commission shall , after consulting ESMA, adopt delegated acts in accordance with Article 41 specifying the sizes specific to the financial instrument mentioned in Article 17(2) and (3) at which firm shall make firm quotes available to other clients and undertake to enter into transactions with any other client to whom the quote is made available. Until such a time as a higher threshold is set by means of such delegated acts for a specific financial instrument the size specific to the financial instrument shall be EUR 100 000.

3. The Commission shall adopt delegated acts in accordance with Article 41 clarifying what constitutes a reasonable commercial basis to make quotes public as referred to in Article 17(5).

Article 19

Post-trade disclosure by investment firms, including systematic internalisers, in respect of shares, depositary receipts, exchange-traded funds, certificates and other similar financial instruments

1. Investment firms which, either on own account or on behalf of clients, conclude transactions in shares, depositary receipts, exchange-traded funds, certificates or other similar financial instruments admitted to trading on a regulated market or which are traded on an MTF ▐, shall make public as close to real time as is technically possible the volume and price of those transactions and the time at which they were concluded. This information shall be made public through an APA.

2. The information which is made public in accordance with paragraph 1 and the time-limits within which it is published shall comply with the requirements adopted pursuant to Article 6. Where the measures adopted pursuant to Article 6 provide for deferred reporting for certain categories of transaction in shares, depositary receipts, exchange-traded funds, certificates or other similar financial instruments, this possibility shall also apply to those transactions when undertaken outside regulated markets or MTFs ▐.

3. The Commission may adopt delegated acts in accordance with Article 41 specifying the following:

(a) identifiers for the different types of trades published under this Article, distinguishing between those determined by factors linked primarily to the valuation of the instruments and those determined by other factors;

(b) elements of the obligation under paragraph 1 to transactions involving the use of those financial instruments for collateral, lending or other purposes where the exchange of financial instruments is determined by factors other than the current market valuation of the instrument.

Article 20

Post-trade disclosure by investment firms, including systematic internalisers, in respect of bonds, structured finance products, emission allowances and derivatives

1. Investment firms which, either on own account or on behalf of clients, conclude transactions in bonds and structured finance products admitted to trading on a regulated market or for which a prospectus has been published, emission allowances and derivatives which are clearing-eligible ▐ in accordance with Article 5(2) of Regulation (EU) No 648/2012 or are admitted to trading on a regulated market or are traded on an MTF or an OTF shall make public the volume and price of those transactions and the time at which they were concluded. This information shall be made public through an APA.

2. The information which is made public in accordance with paragraph 1 and the time-limits within which it is published shall comply with the requirements adopted pursuant to Article 10. Where the measures adopted pursuant to Article 10 provide for deferred and/or aggregated reporting and/or the omission of the volume of the transaction for certain categories of transaction in bonds, structured finance products, emission allowances or derivatives, this possibility shall also apply to those transactions when undertaken outside regulated markets, MTFs or OTFs.

3. The Commission may adopt delegated acts in accordance with Article 41 specifying the following:

(a) identifiers for the different types of trades published under this Article, distinguishing between those determined by factors linked primarily to the valuation of the instruments and those determined by other factors;

(b) the criteria specifying the obligation under paragraph 1 to transactions involving the use of those financial instruments for collateral, lending or other purposes where the exchange of financial instruments is determined by factors other than the current market valuation of the instrument.

TITLE IV

TRANSACTION REPORTING

Article 21

Obligation to uphold integrity of markets

Without prejudice to the allocation of responsibilities for enforcing the provisions of Regulation (EU) No …/… [new MAR], competent authorities coordinated by ESMA in accordance with Article 31 of Regulation (EU) No 1095/2010 shall monitor the activities of investment firms to ensure that they act honestly, fairly and professionally and in a manner which promotes the integrity of the market.

Article 22

Obligation to maintain records

1. Investment firms shall keep at the disposal of the competent authority, for at least five years, the relevant data relating to all transactions in financial instruments which they have carried out, whether on own account or on behalf of a client. In the case of transactions carried out on behalf of clients, the records shall contain all the information and details of the identity of the client, and the information required under Directive 2005/60/EC. ESMA may request access to that information in accordance with the procedure and under the conditions set out in Article 35 of Regulation (EU) No 1095/2010.

2. The operator of a regulated market, MTF or OTF shall keep at the disposal of the competent authority, for at least five years, the relevant data relating to all orders in financial instruments which are advertised through their systems. The records shall contain all the details required for the purposes of Article 23(1) and (3) . ESMA shall perform a facilitation and coordination role in relation to the access by competent authorities to information under the provisions of this paragraph.

Article 23

Obligation to report transactions

1. Investment firms which execute transactions in financial instruments shall report details of such transactions to the competent authority as quickly as possible, and no later than the close of the following working day. The competent authorities shall, in accordance with Article 89 of Directive …/…/EU [new MiFID], establish the necessary arrangements in order to ensure that ESMA and the competent authority of the most relevant market in terms of liquidity for those financial instruments also receives this information.

2. Paragraph 1 shall apply to the following financial instruments when traded outside a trading venue:

(