'Money-market instruments' under MiFID II mean those classes of instruments which are normally dealt in on the money market, such as treasury bills, certificates of deposit and commercial papers and excluding instruments of payment (Article 4(1)(17) MiFID II).

 

 

 

Commission Delegated Regulation (EU) 2017/565 of 25 April 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council as regards organisational requirements and operating conditions for investment firms and defined terms for the purposes of that Directive

 

Article 11
Money-market instruments
(Article 4(1)(17) of Directive 2014/65/EU)


Money-market instruments in accordance with Article 4(1)(17) of Directive 2014/65/EU, shall include treasury bills, certificates of deposits, commercial papers and other instruments with substantively equivalent features where they have the following characteristics:


(a) they have a value that can be determined at any time;


(b) they are not derivatives;


(c) they have a maturity at issuance of 397 days or less.

 

 

 

 

Money market instruments

 

The European Commission can further specify some technical elements with regard to definitions such as the delineation between bonds, structured finance products and money market instruments. The distinction is important as pre-trade and post-trade transparency requirements under MiFIR apply to bonds and structured finance products, but not to money market instruments. The delineation between these instruments is therefore important for the exact application of the transparency requirements for non-equity instruments. The empowerments hereto are in Article 4(2) MiFID II and Article 2(2) MiFIR. The relevant definitions are in Article 4(1), points 17 and 44, MiFID II.

 

ESMA's technical advice:

 

ESMA states that money market instruments shall be treasury bills, certificates of deposits, commercial papers and other instruments with substantially equivalent features that

- have a value that can be determined at any time;

- are not derivatives; and

- have a maturity at issuance of 397 days or less.

 

Assessment of IA need:

 

In order to achieve the objective of MiFID II/MiFIR of more transparency on financial markets, a narrow definition of money market funds, such as the one provided in ESMA's advice, provides less scope for exemptions from pre-trade and post-trade transparency obligations and is therefore preferable. There are inter-linkages with provisions on money market instruments in the UCITS IV Directive (2009/65/EC) and the Proposal of the European Commission for a Regulation on Money Market Funds.

 

Article 2(1)(o) of Directive 2009/65/EC defines money market instruments as "instruments normally dealt in on the money market which are liquid and have a value which can be accurately determined at any time" and Article 50(1)(a) refers to the definition of money market funds in Article 4(1) of MiFID I as eligible investments for UCITS. The latter definition has been preserved in Article 4(1)(17) of MiFID II: "'money market instruments' means those classes of instruments which are normally dealt in on the money market, such as treasury bills, certificates of deposit and commercial papers and excluding instruments of payment".

 

The CESR Guidelines on a common definition of European money market funds and the European Commission Proposal for a Regulation of the European Parliament and of the Council on Money Market Funds (COM(2013) 615 final of 4 September 2013) both refer to Directive 2009/65/EC for part of the criteria on money market instruments that are eligible investments for money market funds.

 

The provisions for money market funds in both the CESR guidelines and the Commission proposal are however much broader than only criteria for eligible money market instruments. They also concern amongst others provisions on the maximum weighted average maturity and weighted average life of the portfolio, the ratings of the issuers of money market instruments, further investments in deposits with credit institutions, financial derivative instruments and reverse repurchase agreements.

 

Under both the CESR guidelines and the Commission proposal for money market funds money market funds can invest in money market instruments with a residual maturity of 397 days or less.

 

It is therefore coherent that the ESMA technical advice refers to both the criterion that the value of the instruments can be determined at any time and that they have a maturity of 397-days or less.

 

The technical advice however refers to maturity at issuance, not residual maturity due to the particular purpose of this definition in MiFID. Using a criterion of residual maturity under MiFID would result in the frequent reclassification of financial instruments of a longer maturity as they get close to their maturity date and pass the 397 days to maturity threshold. This would result in financial instruments previously subject to the transparency requirements of MiFID as suddenly 'going dark' as they pass the 397 day threshold.

 

Commission services therefore are minded to accept the narrower definition provided in ESMA's technical advice as a better fit for the purpose of MiFID than a broader definition such as the one used in the Proposal for a Regulation on Money Market Funds. As these practical reasons explain the chosen definition, no further IA work had been undertaken.

 

Commission Staff Working Document Impact Assessment Accompanying the document Commission Delegated Regulation supplementing Regulation (EU) No 600/2014 of the European Parliament and of the Council with regard to definitions, transparency, portfolio compression and supervisory measures on product intervention and positions {C(2016) 2860 final} {SWD(2016) 156 final}, 18.5.2016, SWD(2016) 157 final, p. 70 - 72

 

 

 

quote

The Perimeter Guidance Manual, Chapter 13, Guidance on the scope of MiFID and CRD IV, FCA, October 2019, p. 2, 3

 

Money market instruments

 

Q28A. What are money market instruments (C2 and article 4.1(17) of MiFID and article 11 of the MiFID Org Regulation)?

 

This means those classes of instruments which are normally dealt in on the money market. Examples include treasury bills, certificates of deposit and commercial paper. A money market instrument does not include an instrument of payment.

 

An instrument is only a money market instrument if it also meets the following conditions:

- it has a value that can be determined at any time;
- it does not fall into sections C4 to C10 of Annex 1 to MiFID (derivatives); and
- it has a maturity at issuance of 397 days or less.


 

 

 

 

 

IMG 0744

    Documentation    

 

 


MIFID II, Article 4(1)(17)

Commission Delegated Regulation (EU) 2017/565 of 25 April 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council as regards organisational requirements and operating conditions for investment firms and defined terms for the purposes of that Directive, Article 11

 

Commission Staff Working Document Impact Assessment Accompanying the document Commission Delegated Regulation supplementing Regulation (EU) No 600/2014 of the European Parliament and of the Council with regard to definitions, transparency, portfolio compression and supervisory measures on product intervention and positions {C(2016) 2860 final} {SWD(2016) 156 final}, 18.5.2016, SWD(2016) 157 final, p. 70 - 72

 

The Perimeter Guidance Manual, Chapter 13, Guidance on the scope of MiFID and CRD IV, FCA, October 2019, p. 2, 3

 

 

 

 

clip2

    Links    

 

 

 

 

 

 

Cookies

We use cookies on our website to support technical features that enhance your user experience and help us improve our website. By continuing to use this website you accept our Privacy Policy.