Market Making Schemes
Market Making schemes refer to the trading venue's duty to identify market making strategies of its trading participants (MiFID II only) and to provide and enforce written agreements with those participants that trigger the obligation (FMIA and MiFID II).
While European law requires market making schemes for equity instruments only, Swiss regulation includes all other asset classes as well.
SIX Swiss Exchange already has defined agreements for Market Makers in place for the ETFs, SFS, SF and Structured Products segments and will continue and extend incentive schemes for Liquidity Providers.
|SSX trading segments||Market Making and Incentive Schemes|
|Equities||Obligations and incentive scheme for Liquidity Providers - no change|
|SFS||Market Making agreements - no change|
|ETF / ETSF / ETP / SF||Market Making agreements - no change|
|IF||Abolish Market Making agreements for funds with assets below CHF 100m - new!|
|CHF / Non-CHF Bonds||Incentive scheme for Liquidity Providers - introduced on 1 January 2017|
|Structured Products||Incentive scheme for Liquidity Providers and Market Making agreements for AMC, Floored Floaters, Alternative Investments and COSI - no change|
|Service / venue||Market Making and Incentive Schemes|
|SLS||No Market Making or Incentive Schemes applicable - no change|
|SCB||No Market Making or Incentive Schemes applicable - no change|
|XBTR||No Market Making or Incentive Schemes applicable - no change|
We believe the approach outlined is fully compliant with Swiss law and aligned to the principles of EU law but is subject to regulatory approvals.
Implementation is scheduled for SMR7 (2017).
Art. 30: Guarantee of orderly trading
Art.30 (para. 3): Guarantee of orderly trading
- MiFID II;
Art. 48 (paras. 2 and 3): Systems resilience, circuit breakers and electronic trading
RTS 8: Market making agreements and market making schemes
Q: In what capacity shall Liquidity Providers enter orders/quotes?
A: Liquidity Providers shall be able to enter quotes in both capacities, "Principal" as well as "riskless Principal". Market Maker as well as Liquidity Providers participating the LPS incentive scheme for Blue Chips are restricted to the "Principal" capacity.
Segment for Structured Products
A: Each Structured Product traded on SIX Swiss Exchange either has one dedicated Liquidity Provider or one Market Maker that both benefit from the fast and specialized Quote Trading Interface (QTI).
Market Making agreements including minimum liquidity criteria however, are only in place for certain non-transparent product types (i.e. Actively Managed Certificates, Floored Floaters and products on Alternative Investments) or COSI. Market Makers that do not fulfill the liquidity requirements can be sanctioned by the exchange.
Liquidity Providers must meet obligations to qualify for benefits. If they fail to meet these obligations, the benefits will not apply.