Systematic internalisers

Impact  Red traffic light

High/medium impact,

more firms may
be required to

register as systematic 
internalisers and

obligations more

Other areas to consider

Organised Trading Facilities; Automated Trading

Current MiFID rules

MiFID provides that a firm should be treated as a systematic internaliser (“SI”) if it deals on own account by executing client orders in shares outside a regulated market or MTF, and performs that activity on an “organised, frequent and systematic basis”.


MiFID provides the following criteria which, if met, indicate that a firm performs an activity on an organised, frequent and systematic basis:


  • the activity has a material commercial role for the firm;
  • the activity is carried on in accordance with non-discretionary rules and procedures;
  • the activity is carried on by personnel, or by means of an automated technical system, assigned to that purpose, irrespective of whether those personnel or that system are used exclusively for that purpose; and
  • the activity is available to clients on a regular or continuous basis.

The core requirement for SIs is to publish firm quotes in shares admitted to trading on a regulated market that are classified as 'liquid' under MiFID when dealing in sizes up to standard market size.


MiFID Level 1 Directive Arts: 4(7) and 27; Recital 51


MiFID Regulation Arts: 21, 22, 25(1), 26 and 29; Recital 15 and 16.

FSA rules


Proposed changes
Draft Directive Recital (13)Draft
Regulation Recital (16), Articles 13,
14, 15 and 16

The draft Regulation:


  • Extends scope of definition of a SI to any financial instrument, so not restricted to shares. Provides more objective criteria for determining when a firm is an SI, in particular, by supplementing the quantative criteria with quantitative thresholds and clarifies that any bilateral trading carried out by clients is relevant in this respect. Clarifies that once the conditions are fulfilled, firms have to register as SIs with their competent authorities.
  • In relation to obligations applicable to shares, extends the scope of the SI regime to include depositary receipts, exchange-traded funds, certificates and other similar financial instruments, admitted to trading on a RM, or traded on an MTF or an OTF (“equity-like instruments”), for which a firm is an SI and for which there is a liquid market. SIs must publish firm bid and offer quotes for equity-like instruments. In the case of equity-like instruments for which there is not a liquid market, SIs shall disclose quotes to their clients on request.
  • Application of requirement relating to equities and equity-like instrument only to apply to SIs who deal in standard market sizes. Requires SIs to maintain a minimum quote size equivalent to 10% of the standard market size of any equity-like instruments in which they are an SI, and must execute orders at quoted prices (may execute order at better prices in justified cases).
  • Extends SI obligation to bonds, structured products emission allowances, and derivatives which are clearing-eligible, such that  SIs are required to provide firm quotes on the request of a client in such products.
  • Requires SIs to be subject to post-trade transparency requirements. In addition SIs who make use of the exemption from identifying themselves in post-trade reports must publish trading data monthly instead of quarterly.
  • SIs may set limits on the number of transactions a client may enter into and the clients to whom quotes are provided, subject that such policy must be set in a non-discriminatory fashion.