ESMA_QA_1489

Status: ✅ Answer Published

Link to ESMA Q&A tool: https://www.esma.europa.eu/publications-data/questions-answers/1489

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Regulatory Context

Regulation : MIF2

Level 1 Regulation: Markets in Financial Instruments Directive II (MiFID II) Directive 2014/65/EU- Secondary Markets

Level 2 Regulation: No information available

Level 3 Regulation: ESMA70-872942901-38 - Q&A on MiFID II and MiFIR market structures topics

Topic: Direct Electronic Access and algorithmic trading

Subject Matter: Direct Electronic Access (DEA) and algorithmic trading

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Question

Submission Date: 03 February 2021

When a firm submits an order through DEA, which is then executed on-venue, should the resulting transaction be considered, from the DEA user perspective, as an on-venue or OTC transaction?

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ESMA Answer

Answer Date: 03-02-2021

[ESMA 70-872942901-38 MiFID II MiFIR market structures Q&A, Q&A 3.32] As per Article 4(1)(41) of MiFID II, DEA is a mechanism allowing a client to “electronically transmit orders relating to a financial instrument directly to the trading venue” using the trading code of the DEA provider. Hence, a DEA trade should not be considered as a series of trades (i.e. one trade involving the DEA client and the DEA provider, one trade submitted by the DEA provider and executed on-venue), but rather as one single trade submitted by the DEA user and executed on-venue. This interpretation is however without prejudice to other specific guidance provided by ESMA for ad hoc regulatory purposes as, for instance, in the Guidelines on “Transaction reporting, order record keeping and clock synchronisation under MiFID II” (ref. ESMA/2016/1452, p.162).

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This document was automatically extracted from the ESMA EMIR Q&A database.