The pain of ill-fitting shoes!

Ana Herrero-WallaceA card pinned to the notice board at my gym last week read: “If you have seen my brown Uggs could you please return them to reception.” It had me wondering if the Uggs in question were a good fit for whoever found them.

In much the same way, I’m wondering why our industry’s regulators are so keen to take a one-size-fits-all approach to the structural changes they propose to make under MiFID II. Some of those in Brussels seem intent on imposing regulation on other asset classes, such as fixed income, based solely on the apparent success achieved in the equity world following the enactment of the original MiFID Directive.

At AFME’s conference on European Market Liquidity which I attended recently, concerns were expressed fairly loudly about plans to impose the equity methodology on the fixed income market with respect to block trading and pre-trade transparency.

Let’s not forget that over the years the markets in various asset classes have developed very differently. The bond market, for example, is almost three times larger than the equities market but has a very small number of instruments listed on exchanges. The vast majority of fixed income trading occurs between broker-dealers and large institutions in a decentralised, over-the-counter (OTC) market. Some commentators have gone so far as to describe the fixed income markets as “old fashioned”. Now, it seems, the regulators are set to impose upon it a very modern and sophisticated piece of legislation. Before doing so, however, they would be well-advised to understand the nuances of this particular market because you can’t simply apply the same transparency rules for fixed income that exist in the equities world.

Without the right lobbying and education to ensure the right fit, we might all end up with pinched toes and some nasty blisters!

What is the likelihood of ending up with "one size fits all" MiFID II regulation?

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