Double Volume Caps
A new concept is being introduced under MiFIR that impacts trading done under the following pre-trade transparency waivers:
- Reference price waiver
- Negotiated trade waiver
For any trading done under these two waivers on venues within the EU there are two volume caps that will apply, limiting the total amount of trading that can be done in any particular equity instrument under these waivers.
The two caps are set at 4% per venue trading and at 8% on overall trading across the EU. The caps are calculated based on the on-book traded volumes of the reference market for each given security over a 12-month rolling period.
If a cap is breached a suspension in trading of the given instrument under these waivers will be triggered. This can be on a particular venue (in the event of a breach of the 4% cap) or across the EU (in the case of a breach of the 8% cap).
SIX Swiss Exchange operates the service SLS which under FMIA will be looking to apply for a Reference Price Waiver. Additionally, SIX Swiss Exchange will also have a Large In Scale waiver for other trades.
For instruments that have a primary market within the European Union, the intention is to follow the European rules on suspension of trading in instruments that violate the caps.
Note that SLS also plans to have a Large In Scale waiver applied for large orders submitted to the service. Orders that qualify under this waiver are not subject to the volume caps.
Implementation with SMR7 (2017)
Since October 2016 we also run the non-display pool SwissAtMid, which operates across the universe of Swiss instruments. We will apply for a Reference Price Waiver from FINMA for all trading done on SwissAtMid.
Art. 5: Volume Cap Mechanism
RTS 3: Draft regulatory technical standards on the volume cap mechanism and the provision of information for the purposes of transparency and other calculations
Q: Will the EU MiFID II Double Volume Caps apply in Switzerland?
A: Switzerland did not experience the same issues with fragmentation which occurred within Europe and led to the creation of the volume caps. This situations is being monitored closely and on an on-going basis, however there are currently no volume caps under Swiss regulation, for Swiss listed instruments trading in Switzerland.
This will impact SwissAtMid and Swiss instruments trading on SLS. Volume caps will apply for all European instruments traded on SLS. In practice this will mean the following (for EU instruments traded in SLS):
- If the 8% cap is breached in Europe, all Reference Price trading will be suspended in SLS for the given instrument until it is resumed in Europe.
- If SLS is getting close to the calculated 4% cap, trading is planned to be pre-emptively stopped in the pool under the Reference Price Waiver until it gets back to an acceptable level.
The trading state of all instruments in SLS with regards to the Reference Price Waiver will be communicated daily to all participants.