RTS 3: Double Volume Caps
MiFID II imposes a cap on the usage of the Reference Price and Negotiated Transaction pre-trade transparency waivers. The caps reference total EU on venue volume and are calculated on a per symbol basis at 4% on any particular venue and 8% market-wide in any 12-month rolling period. In Bats' Q2 2016 release, we added a "capped" symbol reference files in each of our trading and reporting environments (BXE, CXE, TRF) that indicates whether such caps apply on specific instruments. This will not be populated in the TRF environment.
If a waiver cap is reached, a suspension in the relevant symbol will be triggered. Should a symbol not be available for trading under a waiver, any orders or trade reports entered using such waivers will be rejected. The reject message will include a reason code indicating it was related to the Double Volume Caps.
Any orders submitted to the dark order book in the prohibited symbol will be rejected. Dark Lit Sweep orders will only target the integrated order book. Furthermore, ETRs in liquid symbols that use the Negotiated Transaction Waiver will be rejected. Routing in liquid symbols to liquidity partners will not be permitted. If Participants specify a routing instruction that specifically targets dark liquidity, orders will be rejected. If the routing instruction targets a mix of dark and lit liquidity, dark venues will be skipped. For testing purposes, we will configure a number of symbols in our UAT environments to be capped.
MiFID II requires trading venues to take reasonable steps not to breach these limits. Bats may, as a result of its analysis, choose to cap a symbol if it is close to the threshold. This information will be communicated through the new "capped" column of the symbol reference file.