ESMA clarifies treatment of packages under MiFIR’s trading obligation for derivatives

On 21st March 2018, the European Securities and Markets Authority (ESMA) issued an opinion providing further guidance on the treatment of packages under the trading obligation for derivatives which the Markets in Financial Instruments Regulation (MiFIR) introduced on 3 January 2018.

MiFID II’s trading obligation for derivatives does not provide for a tailored regime for packages, which is likely to result in the divergent application of the trading obligation for derivatives in the EU. In order to ensure the consistent application of the trading obligation across the Union, ESMA decided to issue an Opinion clarifying, through a positive list, the categories of packages for which the derivative components subject to the trading obligation are always required to be traded on a trading venue.

Package orders/transactions are composed of two or more financial instruments that are priced as a single unit, simultaneously executed, and where the execution of each component is contingent on the execution of all other components. Packages are a relevant part of today’s financial markets by enabling investment firms and their clients to conduct trades for risk management and hedging purposes.