MIFID II Market Making Scheme for ETFs (MMS)

On top of a market making agreement, investment firms can also sign a market making scheme on a voluntary basis

  • Similar to the previous Liquidity Provider Agreement
  • You can access self-trade prevention
  • Market maker chooses the ETFs he’s interested in quoting and send his orders with the corresponding flag : Account code 6 on Euronext Cash Markets, combined with Algorithm flagged for the MiFID II field ExecutionWithinFirmShortCode
  • Includes fee incentives and connectivity discount
    • Main principles are :
      • The regular fees to trade ETFs is 0.6bps with a min fee of €0.75
      • To these fees, Euronext will apply a % discount (on a monthly basis, when obligations are fulfilled)
      • Based on the LP Market Share (numerator: your volumes [single counted] / denominator: Euronext volumes [double counted]) and depending on the maker and taker activity:
        • Maker discount = 4 x passive market share (capped at 100%)
        • Taker discount = 1 x aggressive market share (no cap)
        • No discount on auction activity.
  • Commitment :
    • Will have to fulfil the conditions for the Market Making Agreement, but Euronext will be slightly more demanding on the presence time as we offer fee rebates:
    • Commitments:
      • Must be fulfilled at least 80% of the time*:
        • Provide liquidity continuously in the chosen financial instrument(s)
        • Post firm, simultaneous two-way quotes**.
        • Provide a €100,000 min size on bid and ask orders with comparable size (max 50% difference between bid and ask)
        • Providing competitive price within the maximum bid-ask range, i.e.:
          • Standard exposure European Equity ETF: 2% maximum spread***
          • Standard exposure Government Bond ETF: 2% maximum spread***
          • All Other ETFs : 3% maximum spread***
  • Reporting: Euronext will report to regulators any market making activity. There is so far no “punishment” system set up, only the fee benefit that are performance-based. 
  • You will receive a daily ETF market data report and you appear in the ETF issuers daily statistics report:
  • Conclusion:

  • You send orders on an ETF ABC more than 50% of the time BUT do not respect the rules in terms of spread and size : You don’t have to do anything
  • You send orders on an ETF ABC more than 50% of the time AND you do respect the rules in terms of spread & size : You complete the Market Making Agreement but get no access to fee rebate.
  • You extend your presence time, size and spread commitment to 80% of the time : You complete the Market Making Agreement AND Market Making Scheme you access fee rebate as well as visibility toward issuers

For more information on ETF liquidity providers and market makers:

www.euronext.com/fr/membership/liquidity-providers-and-market-makers