ESMA has updated its FAQs on investor protection and intermediaries under MiFID 2. New questions added in May focus on:
- best execution: a new question addresses what is meant by “other liquidity provider”;
- client categorisation: new questions look at when and how a firm can assess whether it can treat an individual private investor as a professional client, including how it should assess whether the investor has carried out transactions of “significant size” and whether the investor could meet the relevant conditions if it has been trading for less than a year. The questions also look at the extent to which leveraged financial instruments can be taken into account when assessing the size of an investor’s portfolio;
- third country firms: a new question looks at how the terms “exclusive initiative of the client” and “new categories of investment products or investment services” should be construed; and
- other issues: there is a question about what “ongoing relationship” means, and on the interaction of supervisory powers where fund managers provide investment services.
ESMA also updated its FAQs on transparency and market structures. New questions include further clarification on when operators of RFQ systems should provide pre-trade transparency, how venues and other providers should make data available free of charge and ensure non-discrimination in accessing the information and how certain fields should be populated in given situations. A further question looks at how voice trading systems should apply the MiFIR pre-trade transparency requirements. The market structure FAQs clarify suitability checks that DEA providers must carry out and include a new question on whether an OTF can arrange or trade strategies including an equity leg.