FIA and ISDA have submitted a joint response to ESMA's consultation on 'Draft RTS on package orders for which there is a liquid market'. While the response was impacted by the short consultation period, which closed on 3 January, the two associations called for further dialogue with ESMA recommending it take a 'cautious approach' when identifying package orders that should be considered as having a liquid market as a whole.
"From our members’ experience trading packages, we believe that no package should be considered liquid as a whole unless it meets the following general criteria," the response said. The criteria included:
- All components are denominated in the same currency.
- The package order has no more than three components (or four where all the components are equity derivatives).
- All components come from the same asset class and same RTS 2 sub-asset class.
- All components are liquid (or in any event they should not fall in to the “Other Derivative” bucket of their RTS 2 sub-asset class, as this would suggest that the component is not standardised and is illiquid).
- All components are below large in scale.
- All components are traded on the same trading venue.
