European Regulatory Framework for Financial Instruments
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Furthermore, systematic internalisers may execute orders they receive from their professional clients at prices different than their quoted ones without having to comply with the conditions established in the fourth subparagraph, in respect of transactions where execution in several securities is part of one transaction or in respect of orders that are subject to conditions other than the current market price. The competent authorities shall check: x that investment firms regularly update bid and/or offer prices published in accordance with paragraph 1 and maintain prices which reflect the prevailing market conditions; Systematic internalisers shall be allowed to decide, on the basis of their commercial policy and in an objective nondiscriminatory way, the investors to whom they give access to their quotes. To that end there shall be clear standards for governing access to their quotes. Systematic internalisers may refuse to enter into or discontinue business relationships with investors on the basis of commercial considerations such as the investor credit status, the counterparty risk and the final settlement of the transaction.
Relevant provisions from the implementing regulation: Note: This obligation applies only for shares for which investment firms are registered as systematic internalisers. That means that there is no pre-trade transparency requirement 12/9/2009 11:55:51 AM
greater than such revised quotation size. No responsible broker or dealer shall be obligated to execute a transaction for any subject security as provided in paragraph b2 of this section if: (1) Before the order sought to be executed is presented, such responsible broker or dealer has communicated to its exchange or association pursuant to paragraph b1 of this section, a revised bid or offer; or (2) At the time the order sought to be executed is presented, such responsible broker or dealer is in the process of effecting a transaction in such subject security, and, immediately after the completion of such transaction, such responsible broker or dealer communicates to its exchange or association pursuant to paragraph b1 of this section, a revised bid or offer; provided, however, that such responsible broker or dealer shall nonetheless be obligated to execute any such order in such subject security as provided in paragraph b2 of this section at its revised bid or offer in any amount up to its published quotation size or revised quotation size. 4. Subject to the provisions of paragraph a4 (see under regulated exchanges) of this section: I. No national securities exchange or OTC market maker may make available, disseminate or otherwise communicate to any vendor, directly or indirectly, for display on a terminal or other display device any bid, offer, quotation size, or aggregate quotation size for any NMS security which is not a subject security with respect to such exchange or OTC market maker; and II. No vendor may disseminate or display on a terminal or other display device any bid, offer, quotation size, or aggregate quotation size from any national securities exchange or OTC market maker for any NMS security which is not a subject security with respect to such exchange or II.
World Bank Working Paper
which they are systematic internalisers at the quoted price at the time of reception of the order. However, they may execute those orders at a better price in justified cases provided that this price falls within a public range close to market conditions and provided that the orders are of a size bigger than the size customarily undertaken by a retail investor.
U.S. Regulatory Framework for Financial Instruments
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WP_184_web_12-09-09.pdf 134