Commission Delegated Regulation (EU) 2017/587 of 14 July 2016 supplementing Regulation (EU) No 600/2014 of the European Parliament and of the Council on markets in financial instruments with regard to regulatory technical standards on transparency requirements for trading venues and investment firms in respect of shares, depositary receipts, exchange-traded funds, certificates and other similar financial instruments and on transaction execution obligations in respect of certain shares on a trading venue or by a systematic internaliser (Text with EEA relevance. )

CHAPTER I

GENERAL

Article 1

Definitions

For the purposes of this Regulation, the following definitions apply:

(1) ‘portfolio trade’ means transactions in five or more different financial instruments where those transactions are traded at the same time by the same client and as a single lot against a specific reference price;

(4) ‘systematic internaliser’ means an investment firm as defined in Article 4(1)(20) of Directive 2014/65/EU of the European Parliament and of the Council (¹).

Article 2

Transactions not contributing to the price discovery process

(Article 23(1) of Regulation (EU) No 600/2014)

A transaction in shares does not contribute to the price discovery process where any of the following circumstances apply:

(a) the transaction is executed by reference to a price that is calculated over multiple time instances based on a given benchmark, including transactions executed by reference to a volume-weighted average price or a time-weighted average price, whereby the time instances for price calculation cover a sufficiently long period to ensure that there is no relation to the current market price;

(b) the transaction is part of a portfolio trade which includes five or more different shares;

(c) the transaction is contingent on the purchase, sale, creation or redemption of a derivative contract or other financial instrument where all the components of the trade are to be executed only as a single lot;

(j) the transaction is not a transaction for the purposes of Article 26 of Regulation (EU) No 600/2014, as determined on the basis of the criteria laid down in Article 2(5) of Commission Delegated Regulation (EU) 2017/590 (²), or is a type of transaction listed in Article 13 of this Regulation.

CHAPTER II

PRE-TRADE TRANSPARENCY

Section 1

Pre-trade transparency for trading venues

Article 3

Pre-trade transparency obligations

(Article 3(1) and (2) of Regulation (EU) No 600/2014)

The details of pre-trade data to be made public shall be those specified in Table 1b of Annex I.

Article 4

Most relevant market in terms of liquidity

(Article 4(1)(a) of Regulation (EU) No 600/2014)

The calculation referred to in paragraph 2 shall have the following characteristics:

(a) it shall include, for each trading venue, transactions executed under the rules of that trading venue excluding reference price and negotiated transactions flagged as set out in Table 4 of Annex I and transactions executed on the basis of at least one order that has benefitted from a large-in-scale waiver and where the transaction size is above the applicable large-in-scale threshold as determined in accordance with Article 7;

(b) it shall cover either the preceding calendar year or, where applicable, the period of the preceding calendar year during which the financial instrument was admitted to trading or traded on a trading venue and was not suspended from trading.

Until the most relevant market in terms of liquidity for a specific financial instrument is determined in accordance with the procedure specified in paragraphs 1 to 3, the most relevant market in terms of liquidity shall be either of the following:

(a) the regulated market where that financial instrument is first admitted to trading or first traded;

(b) where the financial instrument is not made available for trading on a regulated market in the Union, the multilateral trading facility where that financial instrument is first admitted to trading or first traded.

Article 5

Specific characteristics of negotiated transactions

(Article 4(1)(b) of Regulation (EU) No 600/2014)

A negotiated transaction in shares, depositary receipts, ETF, certificates or other similar financial instruments shall be considered to be a transaction which is negotiated privately but reported under the rules of a trading venue and where any of the following circumstances applies:

(a) two members or participants of that trading venue are involved in any of the following capacities: (i) one is dealing on own account when the other is acting on behalf of a client; (ii) both are dealing on own account; (iii) both are acting on behalf of a client;

(b) one member or participant of that trading venue is either of the following: (i) acting on behalf of both the buyer and seller; (ii) dealing on own account against a client order.

Article 6

Negotiated transactions subject to conditions other than the current market price

(Article 4(1)(b) of Regulation (EU) No 600/2014)

A negotiated transaction in shares, depositary receipts, ETFs, certificates and other similar financial instruments shall be subject to conditions other than the current market price of the financial instrument where any of the following circumstances applies:

(a) the transaction is executed in reference to a price that is calculated over multiple time instances based on a given benchmark, including transactions executed by reference to a volume-weighted average price or a time-weighted average price, whereby the time instances for price calculation cover a sufficiently long period to ensure that there is no relation to the current market price;

(b) the transaction is part of a portfolio trade;

(c) the transaction is contingent on the purchase, sale, creation or redemption of a derivative contract or other financial instrument where all the components of the trade are meant to be executed as a single lot;

(j) any other transaction equivalent to one of those referred to in points (a) to (c) in that it is contingent on technical characteristics which are unrelated to the current market valuation of the financial instrument traded;

(k) the transaction is not a transaction for the purposes of Article 26 of Regulation (EU) No 600/2014, as determined on the basis of the criteria laid down in Article 2(5) of Delegated Regulation (EU) 2017/590, or the transaction is a type of transaction listed in Article 13 of this Regulation.

Article 7

Orders that are large in scale

(Article 4(1)(c) of Regulation (EU) No 600/2014)

The calculation referred to in paragraph 3 shall have the following characteristics:

(a) it shall include transactions executed in the Union in respect of the financial instrument, whether traded on or outside a trading venue;

(b) it shall cover the period beginning on 1 January of the preceding calendar year and ending on 31 December of the preceding calendar year or, where applicable, that part of the calendar year during which the financial instrument was admitted to trading or traded on a trading venue and was not suspended from trading.

Paragraphs 3 and 4 shall not apply to shares, depositary receipts, certificates and other similar financial instruments that were first admitted to trading or first traded on a trading venue between 1 and 31 December of the preceding calendar year.

Before a share, depositary receipt, certificate, or other similar financial instrument is traded for the first time on a trading venue in the Union, the competent authority shall estimate the average daily turnover for that financial instrument taking into account:

(a) any previous trading history of that financial instrument;

(b) other previous or similar financial instruments of the same issuer;

(c) other financial instruments that are considered to have similar characteristics.

The competent authority shall publish that estimated average daily turnover.

Article 8

Type and minimum size of orders held in an order management facility

(Article 4(1)(d) of Regulation (EU) No 600/2014)

The type of order held in an order management facility of a trading venue pending disclosure for which pre-trade transparency obligations may be waived is an order which:

(a) is intended to be disclosed to the order book operated by the trading venue and is contingent on objective conditions that are pre-defined by the system's protocol;

(b) for orders other than reserve orders, cannot interact with other trading interests prior to disclosure to the order book operated by the trading venue;

(c) once disclosed to the order book, interacts with other orders in accordance with the rules applicable to orders of that kind at the time of disclosure.

Orders held in an order management facility of a trading venue pending disclosure for which pre-trade transparency obligations may be waived shall, at the point of entry and following any amendment, have one of the following sizes:

(a) in the case of a reserve order, a size that is greater than or equal to EUR 10 000 ;

(b) for all other orders, a size that is greater than or equal to the minimum tradable quantity set in advance by the system operator under its rules and protocols.

Section 2

Pre-trade transparency for systematic internalisers and investment firms trading outside a trading venue

Article 9

Arrangements for the publication of a firm quote

(Article 14(1) of Regulation (EU) No 600/2014)

Any arrangement that a systematic internaliser adopts in order to comply with the obligation to make public firm quotes shall satisfy the following conditions:

(a) the arrangement includes all reasonable steps necessary to ensure that the information to be published is reliable, monitored continuously for errors, and corrected as soon as errors are detected;

(b) the arrangement complies with technical arrangements equivalent to those specified for approved publication arrangements (APAs) in Article 14 of Delegated Regulation (EU) 2017/571 that facilitate the consolidation of the data with similar data from other sources;

(c) the arrangement makes the information available to the public on a non-discriminatory basis;

(d) the arrangement includes the publication of the time the quotes have been entered or amended in accordance with Article 50 of Directive 2014/65/EU as specified in Commission Delegated Regulation (EU) 2017/574 (³).

Article 10

Prices reflecting prevailing market conditions

(Article 14(3) of Regulation (EU) No 600/2014)

The prices published by a systematic internaliser shall be deemed to reflect prevailing market conditions where they are close in price, at the time of publication, to quotes of equivalent sizes for the same financial instrument on the most relevant market in terms of liquidity as determined in accordance with Article 4 for that financial instrument.

Where there are no quotes of equivalent sizes for the same financial instrument on the most relevant market in terms of liquidity as determined in accordance with Article 4 for that financial instrument, the prices published by a systematic internaliser shall be deemed to reflect prevailing market conditions where they are close in price to quotes of equivalent sizes for the same financial instrument on trading venues other than the most relevant market in terms of liquidity as determined in accordance with Article 4.

However, the prices published by a systematic internaliser in respect of shares and depositary receipts shall be deemed to reflect prevailing market conditions only where those prices meet the requirements set out in the first paragraph of this Article and respect minimum price increments corresponding to the tick sizes specified in Article 2 of Commission Delegated Regulation (EU) No 2017/588 (⁴).

Article 11

Standard market size

(Article 14(2) and (4) of Regulation (EU) No 600/2014)

The calculation referred to in paragraph 2 shall have the following characteristics:

(a) it shall take into account the transactions executed in the Union in respect of the financial instrument concerned whether executed on or outside a trading venue;

(b) it shall cover either the preceding calendar year or, where applicable, the period of the preceding calendar year during which the financial instrument was admitted to trading or traded on a trading venue and was not suspended from trading;

(c) it shall exclude post-trade large-in-scale transactions as set out in Table 4 of Annex I.

Paragraphs 2 and 3 shall not apply to shares, depositary receipts, ETFs, certificates and other similar financial instruments first admitted to trading or first traded on a trading venue four weeks or less before the end of the preceding calendar year.

Article 11a

Quote size below which the pre-trade transparency requirements under Articles 14, 15, 16 and 17 of Regulation (EU) No 600/2014 apply

(Article 14(2) of Regulation (EU) No 600/2014)

The obligation to make public firm quotes in respect of shares, depositary receipts, ETFs, certificates, and other similar financial instruments shall apply to systematic internalisers when they deal in sizes up to twice the standard market size as determined in accordance with Article 11.

Article 11b

Minimum quote size

(Article 14(3) of Regulation (EU) No 600/2014)

The minimum quote size for a particular share, depositary receipt, ETF, certificate, or other similar financial instrument traded on trading venue shall be equal to the standard market size as determined in accordance with Article 11.

CHAPTER III

POST-TRADE TRANSPARENCY FOR TRADING VENUES AND INVESTMENT FIRMS TRADING OUTSIDE A TRADING VENUE

Article 12

Post-trade transparency obligations

(Article 6(1) and Article 20(1) and (2) of Regulation (EU) No 600/2014)

The field names in Table 3 of Annex I shall be made public using the same naming conventions as specified in the field identifier of that Table.

Where a previously published trade report is amended, market operators and investment firms operating a trading venue and investment firms trading outside a trading venue shall make the following information public:

(a) a new trade report that contains all the details of the original trade report and the cancellation flag specified in Table 4 of Annex I;

(b) a new trade report that contains all the details of the original trade report with all necessary details corrected and the amendment flag specified in Table 4 of Annex I.

Article 13

Application of post-trade transparency to certain types of transactions executed outside a trading venue

(Article 20(1) of Regulation (EU) No 600/2014)

The obligation in Article 20(1) of Regulation (EU) No 600/2014 shall not apply to the following:

(a) excluded transactions listed under Article 2(5) of Commission Delegated Regulation (EU) 2017/590 (⁵) where applicable.

(b) give-up transactions or give-in transactions, which are any of the following transactions: (i) a transaction where an investment firm passes a client trade to, or receives a client trade from, another investment firm for post-trade processing; (ii) a transaction where an investment firm executing a trade passes it to, or receives it from, another investment firm for the purpose of hedging the position that it has committed to enter into with a client.

Article 14

Real time publication of transactions

(Article 6(1) of Regulation (EU) No 600/2014)

For transactions that take place on a given trading venue, post-trade information shall be made public in the following circumstances:

(a) where the transaction takes place during the daily trading hours of the trading venue, as close to real-time as is technically possible and in any case within one minute of the relevant transaction;

(b) where the transaction takes place outside the daily trading hours of the trading venue, before the opening of the next trading day for that trading venue.

For transactions that take place outside a trading venue, post-trade information shall be made public in the following circumstances:

(a) where the transaction takes place during the daily trading hours of the most relevant market in terms of liquidity determined in accordance with Article 4 for the share, depositary receipt, ETF, certificate or other similar financial instrument concerned, or during the investment firm's daily trading hours, as close to real-time as is technically possible and in any case within one minute of the relevant transaction;

(b) where the transaction takes place in any case not covered by point (a), immediately upon the commencement of the investment firm's daily trading hours and at the latest before the opening of the next trading day of the most relevant market in terms of liquidity determined in accordance with Article 4.

Article 15

Deferred publication of transactions

(Article 7(1) and 20(1) and (2) of Regulation (EU) No 600/2014)

Where a competent authority authorises the deferred publication of the details of transactions pursuant to Article 7(1) of Regulation (EU) No 600/2014, market operators and investment firms operating a trading venue and investment firms trading outside a trading venue shall make public each transaction no later than at the end of the relevant period set out in Tables 4, 5 and 6 of Annex II provided that the following criteria are satisfied:

(a) the transaction is between an investment firm dealing on own account other than through matched principal trading and another counterparty;

(b) the size of the transaction is equal to or exceeds the relevant minimum qualifying size specified in Tables 4, 5 or 6 of Annex II, as appropriate.

For transactions for which deferred publication is permitted until the end of the trading day as specified in Tables 4, 5 and 6 of Annex II, investment firms trading outside a trading venue and market operators and investment firms operating a trading venue shall make public the details of those transactions either:

(a) as close to real-time as possible after the end of the trading day which includes the closing auction, where applicable, for transactions executed more than two hours before the end of the trading day;

(b) no later than the opening of the next trading day of the most relevant market in terms of liquidity for transactions not covered in point (a).

For transactions that take place outside a trading venue, references to trading days and closing auctions shall be those of the most relevant market in terms of liquidity as determined in accordance with Article 4.

Article 16

References to trading day and daily trading hours

CHAPTER IV

PROVISIONS COMMON TO PRE-TRADE AND POST-TRADE TRANSPARENCY CALCULATIONS

Article 17

Methodology, date of publication and date of application of the transparency calculations

(Article 22(1) of Regulation (EU) No 600/2014)

By 1 March of each year after the date of application of this Regulation, competent authorities and ESMA shall, in relation to each financial instrument for which they are the competent authority, collect the data, calculate and ensure the publication of the following:

(a) the trading venue which is the most relevant market in terms of liquidity as set out in Article 4(2);

(b) the average daily turnover for the purpose of identifying the size of orders that are large in scale as set out in Article 7(3);