02 February 2011

AMF responses to the European Commission consultation on the MiFID Review

Although supportive of the introduction of an OTF regime, the AMF is of the view that a clear distinction should remain between trading venues (regulated markets and MTFs, and other eligible OTFs for derivatives trading as necessary) on the one hand, and OTFs on the other.

The AMF considers that the explicit consent of the client should continue to be required for trading outside a trading venue. The AMF also stresses the need to clarify the definition of an MTF currently provided in MIFID. Such clarification is all the more needed to avoid possible confusion with the OTF.

An MTF should be defined as a non discretionary multilateral system with open access. A multilateral system can be order driven or quote driven provided it operates a competitive market making system. An MTF should be subject to appropriate governance arrangements, run as a separate legal entity from the other investment services possibly provided by the operator of the MTF, with dedicated systems, and  subject to pre-and post trade transparency for every asset class.

If the operation of a trading facility is a separate investment service, the AMF sees no reasons to create an exemption by not allowing the passporting of the service. The relevance of passporting the facility may depend on the OTF sub category. It would for instance appear very odd for the operator of a broker crossing network to passport any facility as the operator is expected to cross clients (or proprietary orders) already received. On the other hand, an inter-dealer broker would likely need to passport trading screens.

The AMF welcomes the requirement to report the algorithm(s) used by any automated trading actor, whether authorised or not, to the competent authority of the venue it is operating on. However, further thoughts may be given to a potential distinction, to be made through ESMA technical standards between algorithms that trigger investment decision, which would be covered by the reporting requirements, and algorithms used for optimizing execution. A threshold activity could also be possibly considered. For achieving convergence and to find the right balance in the level of required details, the information to be notified should be determined by technical standards at ESMA level, if not reported to ESMA itself.

Full AMF response

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