The European Commission has today adopted new transparency requirements for investment firms, including systematic internalisers. Systematic internalisers are investment firms which are allowed to trade outside trading venues.
The adopted rules introduce minimum share price variation (“tick size increments”) when investment firms quote prices in shares and other equity-like instruments. Up to now, systematic internalisers were allowed greater flexibility in pricing shares. They will continue to enjoy such flexibility when trading larger orders, but for standard trade sizes, they will be bound by the same rules as trading venues. The tick size, or minimum price variation, is the smallest increment permitted in quoting or trading a security. Tick size rules have a significant impact on the trading costs for investors and on overall market quality, as they improve price formation and simplify the trading environment. Today’s Commission Delegated Regulation under the Markets in Financial Instruments Regulation (MiFIR) is based on a Regulatory Technical Standards submitted by European Securities and Markets Authority (ESMA). Today’s rules are part of the Commission’s broader policy to ensure the level playing field between systematic internalisers and trading venues. The Delegated Regulation will be in force after one month unless the European Parliament and the Council object to it. More information here.