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ICMA has published a position paper on MiFID II Trading suspensions from the perspective of fixed income instruments.
ICMA believes that there are many scenarios where a debt instrument or related derivatives may be suspended or removed from trading on an MTF or OTF, in keeping with the rules of the relevant venue, but where the continued ability to trade the instruments in the over the counter (OTC) market will be in the best interest of investors and the orderly functioning of the market. In these cases, the key source of liquidity is likely to come from specialist market-makers for the relevant instruments, who may also be SIs. It is therefore important that before NCA’s require the suspension or removal of financial instruments or related derivatives, they first consider the implications for OTC trading in these instruments, the rights and interests of investors and other creditors of the issuer, and, as much as possible, consult with relevant investors and liquidity providers in their jurisdiction, who may be active in these instruments, prior to any decision to suspend or remove them from trading.
ICMA is concerned that the automatic application of MiFID II Articles 32 and 52 with respect to debt instruments or their related derivatives, under certain scenarios, could be significantly damaging to investors’ interests and the orderly functioning of the market, particularly to the extent that this applies to SIs, who are the key source of bilateral liquidity in these instruments. ICMA therefore recommends that NCAs, in the event of a suspension or removal from trading by a regulated market or trading venue, consider carefully the potential impacts of a broader suspension or removal, including that affecting SIs. Furthermore, ICMA recommends that in such instances, the consideration to suspend or remove instruments and their derivatives from trading be informed by consultation with relevant market stakeholders, including affected investors, SIs and other liquidity providers, and trading venues.