MiFID II: EU issues rules on the trading obligation for derivatives

The Commission has today issued rules to make certain types of derivatives trades safer and more transparent. A derivative is a financial contract linked to the fluctuation in the price of the underlying asset or basket of assets to which it refers (e.g. the development of interest rates). The new rules specify which derivatives should be subject to the trading obligation under the Markets in Financial Instrument Regulation (MiFIR) and follows G-20 commitments to ensure that more trading in derivatives takes place on transparent trading venues, instead of being privately negotiated over the counter. Valdis Dombrovskis, Vice-President in charge of Financial Stability, Financial Services and Capital Markets Union, said: “With these rules, EU financial market players will now have certainty on what derivatives will have to be traded on venues where greater safety, stability and transparency are assured.” Specifically, the new rules determine those derivatives that may only be traded on an EU trading venue or a non-EU trading venue covered by equivalence decisions of the Commission. EU trading venues include regulated markets, multilateral trading facilities, and organised trading facilities. The rules adopted today take the form of regulatory technical standards (RTS) and will now be sent for scrutiny to the European Parliament and the Council. Furthermore, the Commission is planning to soon adopt its equivalence decision recognising some US trading platforms, following last month’s agreement with the US Commodity Futures Trading Commission (CFTC) on a common approach regarding certain derivatives trading platforms. For more information see here.