Full steam ahead

Yesterday ESMA published the long outstanding reference data for equities and bonds. Captains of the industry might worry little about abbreviations such as LIS, SMS, ADT, AVT or ADNT. But the engineers below deck understand perfectly well that these are the crucial coordinates to keep the ship on course. The reference data allows you to work out what MiFID II really means at an instrument-by-instrument level and turn lofty principles written in MiFID... Read More

Clarity through the DEA tiers

An ESMA Q&A published this week provides some further guidance regarding the authorization of sub-delegated DEA providers, but it still leaves room for uncertainty. The Q&A draws a distinction between a DEA client that has EU exchange access directly via a member (Tier 1 DEA client), and a DEA client that obtains access through a sub-delegated DEA provider (Tier 2 DEA client). ESMA argues that Tier 2 clients do not have DEA access because... Read More

More unanswered questions

At first glance, the MiFID II trading obligation for shares seems fairly benign, bringing the bulk of equities trading ‘safely’ back to regulated execution venues. Whilst appearing all encompassing, it still leaves room for plain old-fashioned OTC trading on an ad hoc basis (or, technically speaking, below the threshold for an EU SI). But add into the mix the trading of dual listed instruments and the impact becomes potentially more harmful.... Read More

MiFID II quick fixes

In its consultation for changing RTS 1, published yesterday, ESMA suggests that the tick size regime should also be extended to Systematic Internalisers. I don’t want to discuss whether it is a sensible proposal. Nor do I want to debate whether ESMA can use a Level 2 text to override the explicit statement in MiFID II (Article 18 and 39). MiFID II was always a carefully balanced political compromise across many different stakeholders and changing... Read More

A decade on, it’s time for the sequel

So, MiFID I, you turn 10 today. Happy Birthday! That’s an excellent reason to pause and celebrate a little. When you first arrived markets were dominated by national stock exchanges with little or no pan-European focus, trading was mostly manual, and smart order routing and best execution were foreign terms from across the pond. You’ve certainly left your mark on the past decade and markets today are significantly changed. We could reminisce... Read More

Who makes the decisions around here?

Recording the execution decision maker is a new requirement under MiFID II. Working out how to populate that field turns out to be trickier than expected. Take a buy-side that gives strict execution instructions on how to execute its agency care order. On the one hand, you could argue that the sell-side made no decisions and therefore records NORE (MiFID II speak for client). On the other hand, you could say that by accepting the order and the instruction... Read More

The MiFID II waiting game

We are now well into October and market participants are still waiting patiently for ESMA to provide details of instrument data for MiFID II. The industry is keen to consume important data to drive functionality and trading strategies; basics such as which instruments are in scope, which are classed as liquid, what is large in scale and where the equity dark volume caps will fall. The download interface mechanisms also remain a mystery. ESMA did publish... Read More

Bottlenecks ahead

ESMA issued a public statement yesterday recognising that there is just not enough time to review all the pre-trade transparency waivers and position limits before MiFID II comes into force on 3rd January. Rather than create an impasse they have, thankfully, opted for a pragmatic approach to get things moving along. To smooth the path, in the absence of an ESMA opinion, the national competent authorities (NCAs) can proceed for now based on their own... Read More

A position of responsibility

As the MiFID II implementation date draws closer, implications for US firms continue to emerge. One area raising questions in the listed derivatives space is around position reporting and commodity position limits. Under MiFID II, EU investment firms are required to submit position reports to the regulators. Position limits under MiFID II are applicable to a “person” which is, presumably, the end client. However, in a recent Q &... Read More

Make room for some blocks

Block trading is unique as it enjoys rare bi-partisan support by practitioners and politicians alike. Unfortunately, relatively few people know how to navigate among block venues, due to their inherent opacity. To make matters worse, even fewer market participants command orders exceeding the Large in Scale (LIS) thresholds and decide to execute them in one go rather than put them through the algo-grinder churning out thousands of tiny trades. With... Read More

For infosec the only way is global

With information security rapidly gaining prominence over the last few years legislators have jumped into action to improve safeguards and public confidence in IT systems. While information security concerns prevail across all industries, in financial services due regard for them is absolutely crucial to the maintenance of functioning markets. Just imagine CCPs losing data on their clients’ positions, or banks tweeting their clients’ accounts... Read More

Commodities ancillary test moves forward

The commodity derivatives ancillary test is easily one of the most complex pieces within MiFID II, making the double volume cap in equities look more like an amuse-bouche. The new test determines whether a firm’s dealing in commodity derivatives is merely an ancillary activity, allowing it to stay out of scope for MiFID II. Trying to summarise the test in a few simple slides highlights its convoluted nature. ESMA recently published its partial... Read More

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