Trading Venue and Microstructure Requirements

  • Trading Venue and Microstructure Requirements

3.1 Clock Synchronisation

Under MiFID II there is a requirement for timestamps on messages issued by trading systems with a gateway-to-gateway latency of no more than one millisecond to be formatted in at least microseconds, and to diverge from Coordinated Universal Time (UTC) by no more than one hundred microseconds. Trading systems with gateway-to-gateway latency in excess of one millisecond, meanwhile, are required to be formatted in at least milliseconds, and to be accurate within one millisecond.

Gateway-to-gateway latency on the Cash markets is less than one millisecond. As a result, timestamps on messages issued by the Cash market trading system (which are already formatted in microseconds) are to be accurate within a hundred microseconds.

For the other MTS markets, MTS is updating message formats to provide the required level of granularity where necessary, and building infrastructure to ensure that its business clocks are compliant with the specific level of accuracy requested.

3.2 Algo Testing (Cash, BondVision and Repo markets)

MiFID II requires market participants to test each of the algorithms that they deploy on a trading venue. MTS intends to provide a means for the testing of algorithms in the provision of an External Test Environment mirroring instruments available in Production.

  • Participants are required to register the ID of any Algo used to automatically send any Quotes/Orders to the market.
  • MTS trading venues will require self-certification that each Algo has been tested.
  • MTS trading venues will require the population of a number of new additional fields for each Quotes/Order sent to the market (e.g. Algo yes/no, Short Codes, Client ID, etc.) MTS will utilise Short Codes mapped end of day for the transmission of this information to simplify data provision and avoid negative impact on latency.

For additional information on our approach to the collection of this information, please refer to the following presentations for the buyside and the sellside.

3.3 Pre-trade price and quantity controls (Cash, BondVision and Repo markets)

  • Full size and price controls at central system will be implemented on and calibrated for all relevant markets.

3.4 Order to transaction ratios (Cash and Repo markets)

  • MTS intends to calibrate and publish appropriate OTRs per instrument and monitor on a daily basis that there is no significant breach of these ratios by participants.

3.5 Trading Obligation for Derivatives

  • Derivative transactions between Counterparties subject to EMIR’s Clearing Obligation must be traded on a trading venue (a Regulated Market, MTF, or OTF) as part of MiFID II’s Trading Obligation for Derivatives when the derivative contracts are:

           (i)    eligible for clearing; and
           (ii)   deemed sufficiently liquid by ESMA.

  • To allow market participants to meet this requirement, MTS has launched MTS Swaps, a fully regulated electronic market for interest rate swaps trading. Buy-side clients have the possibility to trade and clear swaps via their chosen sponsor bank or banks. For enquiries about MTS Swaps, please contact the MTS Swaps Team.

3.5 System requirements - capacity, circuit breakers, throttle limits, clock sync, co-location (All MTS Markets)

In addition to Clock Synchronisation, MiFID II requires other technical, non-functional, upgrades. As a result, MTS will fully comply with the requirements of RTS 10 (co-location), RTS 7 Article 11 and Article 14 (system capacity management), and RTS 7 Article 18 (throttle limits).

In this regards, the current gap between the present-day MTS systems and the MiFID II requirement is already restricted and MTS is already working to align its services with the upcoming regulations.