Article 17
Provisions for the liquidity assessment for bonds and for the determination of the pre-trade size specific to the instrument thresholds based on trade percentiles
1.
For determining the bonds for which there is not a liquid market for the purposes of Article 6 and according to the methodology specified in Article 13(1), point (b), the approach for the liquidity criterion ‘average daily number of trades’ shall be taken applying the ‘average daily number of trades’ corresponding to stage S3 (7 daily trades).
2.
Corporate bonds and covered bonds that are admitted to trading or first traded on a trading venue shall be considered to have a liquid market until the application of the results of the first quarterly liquidity determination as set out in Article 13(18) where:
(a)
the issuance size exceeds EUR 1 000 000 000 during stages S1 and S2, as determined in accordance with paragraph 6;
(b)
the issuance size exceeds EUR 500 000 000 during stages S3 and S4, as determined in accordance with paragraph 6.
3.
For determining the size specific to the financial instrument for the purposes of Article 5 and according to the methodology specified under Article 13(2), point (b)(i), the approach for the trade percentile to be applied shall be used applying the trade percentile corresponding to the stage S3 (50th percentile).
For determining the size specific to the financial instrument for the purposes of Article 5 and according to the methodology specified under Article 13(2), points (b)(ii) to (iv), the approach for the trade percentile to be applied shall be used applying the trade percentile corresponding to the stage S1 (30th percentile).
4.
ESMA shall, by 30 July of the year following the date of application of Regulation (EU) No 600/2014 and by 30 July of each year thereafter, submit to the Commission an assessment of the operation of the thresholds for the liquidity criterion 'average daily number of trades' for bonds as well as the trade percentiles that determine the size specific to the financial instruments covered by paragraph 8. The obligation to submit the assessment of the operation of the thresholds for the liquidity criterion for bonds ceases once S4 in the sequence of paragraph 6 is reached. The obligation to submit the assessment of the trade percentiles ceases once S4 in the sequence of paragraph 8 is reached.
5.
The assessment referred to in paragraph 4 shall take into account:
(a)
the evolution of trading volumes in non-equity instruments covered by the pre-trade transparency obligations pursuant to Article 8 and 9 of Regulation (EU) No 600/2014;
(b)
the impact on liquidity providers of the percentile thresholds used to determine the size specific to the financial instrument; and
(c)
any other relevant factors.
6.
ESMA shall, in light of the assessment undertaken in accordance with paragraphs 4 and 5, submit to the Commission an amended version of the regulatory technical standard adjusting the threshold for the liquidity criterion ‘average daily number of trades’ for bonds according to the following sequence:
(a)
S2 (10 daily trades) by 30 July of the year following the date of application of Regulation (EU) No 600/2014;
(b)
S3 (7 daily trades) by 30 July of the year thereafter; and
(c)
S4 (2 daily trades) by 30 July of the year thereafter.
7.
Where ESMA does not submit an amended regulatory technical standard adjusting the threshold to the next stage according to the sequence referred to in paragraph 6, the ESMA assessment undertaken in accordance with paragraphs 4 and 5 shall explain why adjusting the threshold to the relevant next stage is not warranted. In this instance, the move to the next stage will be postponed by one year.
8.
ESMA shall, in light of the assessment undertaken in accordance with paragraphs 4 and 5, submit to the Commission an amended version of the regulatory technical standard adjusting the threshold for trade percentiles according to the following sequence:
(a)
S2 (40th percentile) by 30 July of the year following the date of application of Regulation (EU) No 600/2014;
(b)
S3 (50th percentile) by 30 July of the year thereafter; and
(c)
S4 (60th percentile) by 30 July of the year thereafter.
9.
Where ESMA does not submit an amended regulatory technical standard adjusting the threshold to the next stage according to the sequence referred to in paragraph 8, the ESMA assessment undertaken in accordance with paragraphs 4 and 5 shall explain why adjusting the threshold to the relevant next stage is not warranted. In this instance, the move to the next stage will be postponed by one year.