ESMA · ESMA_QA_1645 Answer Published

Organized Trading facilities OTFs - Liquidity of sovereign debt instruments

Regulation
Markets in Financial Instruments Directive II (MiFID II) Directive 2014/65/EU- Secondary Markets
Topic
Multilateral and bilateral systems
Submitted
2017-04-03
Answered
2017-04-03
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Question

The operator of an OTF may engage in dealing on own account other than matched-principal trading only with regard to sovereign debt instruments that do not have a liquid market. (Article 20(3) of MiFID II. How should the liquidity of sovereign debt instruments be assessed?

Answer

[ESMA 70-872942901-38 MiFID II MiFIR market structures Q&A, Q&A 5.13] ESMA notes that RTS 2 sets out how to determine whether a financial instrument has a liquid market. Although RTS 2 was developed for the sole purpose of further specifying the MiFIR pre-trade and post-trade transparency obligations for trading venues and investment firms, ESMA considers that the methodology and criteria set out in RTS 2 for assessing whether a sovereign bond has a liquid market are also relevant, and should serve as a reference, for the purpose of Article 20(3) of MiFID II.
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This Q&A is published by European Securities and Markets Authority and is non-binding. It does not constitute legal advice. Updated weekly from official ESA sources.

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