MAR 11A Pre-trade transparency rules for equity instruments

The purpose of this chapter is to set out the conditions applying to pre-trade transparency waivers in relation to equity transparency instruments, to be read in conjunction with Article 3 of MiFIR and MiFID RTS 1.

This chapter applies to a trading venue operator.

Article 3 of MiFIR does not apply in respect of systems matching orders based on a trading methodology by which the price of the equity transparency instrument is derived from:

(1) the trading venue where that financial instrument was first admitted to trading; or

(2) any other trading venue,

and the reference price is widely published and regarded by market participants as a reliable reference price.

The amount of liquidity associated with the reference price should be an indicator of whether the reference price is reliable for the purposes of MAR 11A.2.1R.

The reference price in MAR 11A.2.1R must be established by obtaining:

(1) the midpoint within the current bid and offer prices of the trading venue to which MAR 11A.2.1R applies; or

(2) when the price referred to in (1) is not available, the opening or closing price of the relevant trading session.

Orders must only reference the price referred to in MAR 11A.2.3R(2) outside the continuous trading phase of the relevant trading session.

The midpoint in MAR 11A.2.3R(1) may be derived from the current bid and offer prices of more than one trading venue.

Article 3 of MiFIR does not apply in respect of systems that formalise negotiated transactions which are:

(1) made within the current volume weighted spread reflected on the order book or the quotes of the market makers of the trading venue operating that system;

(2) in an illiquid equity transparency instrument that does not fall within the meaning of a liquid market in Article 2(1)(17) of MiFIR, and are dealt within a percentage of a suitable reference price, being a percentage and a reference price set in advance by the system operator; or

(3) subject to conditions other than the current market price of that financial instrument.

Article 3 of MiFIR does not apply in respect of orders that are large in scale compared with normal market size.

For the purposes of MAR 11A.4.1R, an order is ‘large in scale’ where, in respect of: 

(1) an equity transparency instruments other than an ETF, it is equal to or larger than the minimum size of orders set out in Tables 1 and 2 of Annex II of MiFID RTS 1; and

(2) an ETF, the order is equal to or larger than 1,000,000 euros.

Unless the price or other relevant conditions for the execution of an order are amended, the waiver in MAR 11A.4.2R continues to apply in respect of an order that is large in scale when entered into an order book but that, following partial execution, falls below the threshold applicable for that financial instrument as determined in accordance with MAR 11A.4.2R.

For the purpose of determining orders that are large in scale, the FCA calculates the average daily turnover in respect of shares, depositary receipts, certificates and other similar financial instruments traded on a trading venue.

MAR 11A.4.4G and MAR 11A.4.5G do not apply to shares, depositary receipts, certificates or other similar financial instruments first admitted to trading or first traded on a trading venue 4 weeks or less before the end 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, the FCA estimates the average daily turnover for that financial instrument, taking into account any previous trading history of that financial instrument and of other financial instruments that are considered to have similar characteristics, and publishes that estimate.

The estimated average daily turnover referred to in MAR 11A.4.7G should be used for the calculation of orders that are large in scale during a 6-week period following the date that the share, depositary receipt, certificate or other similar financial instrument was admitted to trading or first traded on a trading venue.

The FCA calculates and publishes average daily turnover based on the first 4 weeks of trading before the end of the 6-week period referred to in MAR 11A.4.8G. The average daily turnover should be used for the calculation of orders that are large in scale and until an average daily turnover calculated in accordance with MAR 11A.4.4G and MAR 11A.4.5G applies.

Average daily turnover is calculated by dividing the total turnover for a particular financial instrument as specified in Article 17(4) of MiFID RTS 1 by the number of trading days in the period considered. The number of trading days in the period considered is the number of trading days on the most relevant market in terms of liquidity for that financial instrument as determined in accordance with MAR 11A.2.

Article 3 of MiFIR does not apply in respect of orders held in an order management facility of a trading venue pending disclosure.  

Where a portion of a quantity of an aggressive order has executed against the disclosed quantity of a reserve order and other disclosed orders in the order book of a trading venue, MAR 11A.5.1R applies to the non-disclosed quantity of the reserve order held in a trading venue's order management facility.

Where MAR 11A.5.3R applies, the non-disclosed quantity of the reserve order can be executed against the remainder of the quantity of the aggressive order.

An ‘aggressive order’, for the purposes of MAR 11A.5.3R, is a limit order that has been disclosed in the order book of a trading venue and which initiates trades.