What must a systematic internaliser quote, and how must it execute client orders?

The MiFID II review (Directive (EU) 2024/790), transposed in Cyprus by Law 183(I)/2025 from 17 October 2025, made the definition in Law 87(I)/2017 qualitative and limited it to equity instruments. An SI is now an investment firm that, on an organised, frequent and systematic basis, deals on own account in shares, depositary receipts, ETFs, certificates or similar instruments by executing client orders outside a regulated market, MTF or OTF, without operating a multilateral system. A firm may also opt in. The earlier quantitative tests, based on ESMA's EU trading data, no longer apply. An SI is also not simply another name for a market maker, which is a separate concept.

A firm that is an SI notifies CySEC, which passes the notification to ESMA, and ESMA keeps the list of SIs in the EU. Since 28 March 2024 an SI must also have transparent, non-discriminatory execution rules and contingency arrangements. The MiFIR review also abolished SI quoting duties in non-equity instruments (derivatives, bonds, structured finance products and emission allowances) from 28 March 2024, and who publishes an OTC trade now depends on a separate status, the designated publishing entity.

For shares and other equity instruments traded on a venue, an SI publishes firm quotes where there is a liquid market. Where there is none, it discloses quotes to its clients on request. Each quote is a firm two-way price, a bid and an offer, for one or more sizes up to the threshold, and must reflect prevailing market conditions. Quotes are published regularly and continuously during normal trading hours, in a form other market participants can easily reach, on a reasonable commercial basis. The SI may update them at any time but may withdraw them only in exceptional market conditions.

The sizes changed on 23 November 2025, when the new thresholds in RTS 1 began to apply under the amended Article 14. The quoting duties now apply when an SI deals in sizes up to twice the standard market size (SMS), and the minimum quote size is the SMS itself; above twice the SMS the quoting rules do not apply. The exam material describes the rules that applied until 22 November 2025. Under them the SI chose its quote sizes, with a minimum of 10% of the SMS, its quotes covered sizes up to the SMS, and the SI rules fell away for dealing above the SMS.

Standard market size comes from classes. Shares are grouped into classes according to the arithmetic mean value of the orders executed in them, where the market means all orders executed in the EU in that share except those large in scale. The competent authority of the most relevant market for each share determines its class at least once a year, and ESMA publishes the result. That annual exercise sets the SMS for each share; it does not decide whether a firm is an SI.

An SI executes client orders at the price it is quoting when it receives the order. In justified cases it may give a better price, provided the price stays inside a published range close to market conditions. For professional clients it may also deal at prices away from its quotes where execution in several securities forms part of one transaction, or where the order is on terms other than the current market price.

Two rules cover orders that do not match a quote size. If an SI quotes only one size, or its largest quote is below the SMS, and a client order arrives that is bigger than the quote but smaller than the SMS, the SI may choose to fill the excess at the quoted price. With the minimum quote now equal to the SMS, a largest quote below the SMS should no longer arise. If the SI quotes several sizes and chooses to execute an order that falls between them, it must use one of its quoted prices, in line with MiFID II's client order handling rules.

An SI does not have to deal with everyone. Under Article 17 it may decide, under its commercial policy and on an objective, non-discriminatory basis, which clients get access to its quotes, and may limit the number of transactions it enters into with a client at those quotes. SIs must respect the tick-size regime, and since 28 March 2024 they may match orders at the midpoint for any size, not only for large-in-scale orders. Best execution and client order handling are covered in What do best execution and client order handling require?