MiFID II Market Maker

This section is for those who perform Market Making strategies according to MiFID II, which requires the entity to enter into an agreement with the relevant exchange, Borsa Italiana in this instance.

Please let it be noted, that Borsa Italiana will not perform any monitoring to analyse and alert a member as to whether they are performing a Market Making strategy according to MiFID II. It is the responsibility of the entity in question to determine as to whether they are performing Market Making strategies according to MiFID II.

A MiFID II Market Maker will be required to provide liquidity by placing comparable competitive bid and/or ask orders on their own account, which respect a maximum spread and minimum countervalue, as defined by Borsa Italiana. There may be unlimited MiFID II Market Makers per instrument (or none).

 

Benefits to being a MiFID II Market Maker

There will be a monetary incentive for those members which respect the obligations of a MiFID II Market Maker in stressed market conditions. This benefit is defined in the Price List for trading services.

 

Requirements

No requirements. An entity must only sign the agreement with Borsa Italiana, which is managed through Member Portal. There are no limits to the number of products a single entity can support as a MiFID II Market Maker.  

 

Obligations

MiFID II Market Maker obligations are defined by Borsa Italiana.

  • Obligation to display bid and ask prices continuously.

    The MiFID II Market Maker shall comply with the obligation to enter simultaneous buy and sell orders for comparable quantities.
  • Obligation to display a minimum size.

    The MiFID II Market Maker must comply with the obligation to display a minimum size of €5,000 for all instruments in which they support as a MiFID II Market Maker.

    During stressed market conditions, the size is reduced by half.
  • Maximum spread obligation.

    The MiFID II Market Maker  must comply with the same maximum spread obligation that is set for the Specialist for the instrument(s) they support as an MiFID II Market Maker. Specialist’s spread can be found on our website, here.

    During stressed market conditions, the spread is doubled.
  • Comparability obligation

    The MiFID II Market Maker must make sure that the total bid size orders does not diverge more than 50% against the total ask size orders, according to the following formula: 

    Max (Total Buy Quantity, Total Sell Quantity) = Max
    Min (Total Buy Quantity, Total Sell Quantity) = Min
    If ( Min < ( Max / 2 )) Then test has failed

MIFID II Market Makers  are required to adhere to their obligations for 50% of each trading day. The assessment will be calculated and disseminated on a monthly basis.

The daily compliance rate will be calculated in terms of four separate components:

  • Presence
  • Size
  • Spread
  • Comparability  check

 

IT set up

Orders entered to fulfil the MiFID II Market Maker quoting obligations must be “Anonymous Quotes and Single Orders” or “Single Orders”. “Anonymous Quotes” allow the MiFID II Market Maker to contextually submit bid and ask orders.

A new MiFID II Market must test the “Anonymous Quote”, should they wish to use this functionality, before starting the activity.

MiFID II Market Makers are given the option of two dedicated interfaces for the relevant instruments:

CompID “M” for those MiFID II Market Makers that wish to submit both orders and anonymous quotes

CompID “L” for those MiFID II Market Makers that wish to submit orders only.

A MiFID II Market Maker must decide which interface they wish to use when signing the agreement to be a MiFID II Market Maker. The MiFID II Market Maker activity should be covered using only one naming convention (CompID “M” or CompID “L”), but the member can set up more CompID’s of the same type.

The “M” or “L” CompID may be used for MiFID II Market Maker activity only and only for those instruments which the entity supports as a MifID II Market Maker.

 

How to become a MiFID II Market Maker

The agreement to become a MiFID II Market Maker  is signed through Member Portal. When signing the agreement you will be able to select the instruments that you would like to support as a MiFID II Market Maker and which interface.

 

Resignation of status

The discontinuation of the activity of an MiFID II Market Maker must be communicated to Borsa Italiana and the resignation of status as an MiFID II Market Maker is managed through Member Portal. The resignation shall entry in force from the date specified by Borsa Italiana in agreement with the MIFID II Market Maker.

 

Please find below the list of all current MiFID II Market Makers and the supported instruments:

https://memberportal.borsaitaliana.it/web/borsa/report/-/report-url/download-mm-mifid-etfplus

 

 


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