The Systematic Internaliser Regime refers to a regulatory framework, primarily from MiFID II in traditional finance, that designates an investment firm as a “systematic internaliser” if it deals on its own account when executing client orders outside a regulated market or multilateral trading facility, on a frequent, systematic, and substantial basis. In the evolving crypto landscape, while not yet universally applied, the concept is relevant for large institutional crypto market makers and OTC desks that frequently execute client trades against their proprietary capital. Its purpose is to bring transparency and regulatory oversight to bilateral, off-exchange trading.
Mechanism
Under a systematic internaliser regime, firms meeting specific thresholds for proprietary trading against client orders are subject to obligations typically associated with regulated exchanges. These obligations often include pre-trade transparency (publishing firm quotes) and post-trade transparency (publishing trade prices and volumes). The mechanism is designed to prevent information asymmetry and ensure fair pricing, even when trades are not executed on public order books. For crypto, this would mean institutional liquidity providers would be required to publicly disclose their prices and executed trades, similar to how traditional securities are handled.
Methodology
Adhering to a systematic internaliser regime involves implementing robust internal systems for trade execution, pricing, and reporting. This includes real-time monitoring of trading activity to determine if the firm crosses the “frequent, systematic, and substantial” thresholds, and developing compliant data publication mechanisms. For institutional crypto players anticipating future regulatory convergence, the
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