Deciphering the new map

Two key themes – liquidity and risk – always rise to the surface of any discussion around the implementation of regulation for OTC derivatives trading in Europe and North America. A couple of recent articles in The Economist neatly outline both sides of the argument by discussing risk, potentially increasing transaction volumes and strategic business opportunities arising from the current regulatory direction. Before the meltdown, it was common knowledge that most... Read More

Block Trade: Endangered species or old habit?

Currently, MiFID favours block trades by granting them privileges that regular sized trades do not receive. A block trade between two institutional investors is treated rather like a Sumatran elephant that is way up on the red list of threatened species. Regulators protect block trades by allowing for pre-trade transparency waiver and delayed post-trade reporting. At the other end of the scale is the small trade (only a few shares) between a VWAP algo and a high-frequency trading... Read More

Regulation, regulation, regulation!

As market participants are still reeling from the attack on HFT and technological innovation in the latest draft amendments to MiFID II, let’s take a look at the rapporteur Markus Ferber’s draft changes to the proposed MiFIR EU regulation. The biggest change is that the OTF category, previously proposed in an attempt to regulate OTC trading on broker crossing systems, now looks to be only for non-equities – think on a par with SEFs in the US. The amended version of MiFIR... Read More

Treat the cause, not the symptom

The current MiFID II draft proposes a minimum duration for any order of 500 milliseconds (see Should have gone to Specsavers!). Politicians seem to believe that installing a minimum duration for orders will halt the HFT ‘madness’ and bring some much needed calm to the market. Unfortunately, it looks like they are going to treat only the symptoms and not the cause. Trading in an open limit order book (aka continuous trading) is a ‘Winner-Takes-All’ game.... Read More

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