Become a master of suspense

Starting October 1, 2018, CME Regulatory Advisory RA1720-5 comes into effect. The advisory details the limited use of suspense accounts, which are temporary holding accounts submitted at the time of order entry into Globex, but prior to the allocation of the executions to specific accounts on a carrying clearing member’s books. Only a de minimis use of general or non-customer... Read More

Brexit fragmentation

MiFID brought market fragmentation to Europe back in 2007. In broad strokes incumbent exchanges lost market share to newcomer MTFs predominantly located in the UK. For UK stocks this meant that the fragmentation occurred within their home country, whereas EU27 stocks moved partly to London. But how will that change with Brexit? Will markets bifurcate? Will volume return to continental... Read More

Is the DVC a ban in disguise?

If you had asked me last year what the actual impact of the double volume cap (DVC) would be, I would have said that it’s ridiculously complex to operate but wouldn’t matter all that much because it would likely only impact a few stocks. Seems I was wrong, judging by yesterday’s announcement from ESMA. Combining the statistics for January and February 2018, a total... Read More

SIs on the rise across asset classes

There’s been much speculation about the revival of the Systematic Internaliser as MiFID II has sharpened its rules. So now that we’re almost two months into the new regime, how is it looking? Luckily the regulators (e.g. ESMA and FCA) publish registers of all their SIs, and the asset class they’re active in, telling us something about the evolving market structure.... Read More

Peeling back the layers

Changes to the Large in Scale (LIS) thresholds in MiFID II appear to be relatively balanced at first sight – lower than under MiFID I for shares with a low average daily turnover (ADT) and significantly higher for those with a high ADT (Graph 1). However, include the transparency calculations recently published by ESMA and it paints a starkly different picture. As Graph 2 shows,... Read More

ESMA’s third-country venues – the naughty or nice list

ESMA recently issued guidance on the treatment of commodity derivatives traded on third-country venues in the context of the MiFID ll position limit regime. Prior to this is was not clear if commodity derivatives traded on a third-country exchange would be considered economically equivalent OTC (“EEOTC”) contracts and would consequently fall under the position limit... Read More

Pieces coming together

Derivatives market participants have been rightfully concerned about the potentially adverse impact of MiFID II on global trading. However, the US and EU authorities have taken significant steps in recent weeks to mitigate some of those concerns. The CFTC has issued an interpretative letter regarding the unbundling of research, something that is mandatory in the EU under MiFID II... Read More

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... 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... 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”... 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... Read More

Sometimes it’s tough being average

Back in March the CME Group postponed the effective date of amendments to Rule 553 (“Average Price System”) until July 2, 2018 to allow sufficient time for affected Exchange Clearing Member Firms and CME Clearing to make the necessary changes to implement the rule. CME Rule 553 permits a clearing member firm to calculate an average price for trades via its own internally... Read More

The same, only different?

For MiFID II to work, the industry must have a clear understanding of what constitutes a single instrument. For cash products such as equity or debt this is straightforward, but in derivatives the concept of a single instrument isn’t really appropriate and things quickly get complicated. Looking ahead, it’s feasible that an OTF or SI offers trading in a bilateral cleared... Read More

MiFID II – a catalyst for innovation

Trading in auctions – in contrast to continuous matching – has long been poised to grow under MiFID II, due to the technicalities in the pre-trade transparency regime and its waivers. With the go-live date edging ever-closer, the regulation has become a catalyst for innovation instead of being merely a cost of doing business. Exchanges are currently rolling out new and... Read More

Is the regulatory WORM turning?

A week before President Trump’s inauguration the CFTC approved a proposal to amend the record keeping requirements contained in Regulation 1.31. The changes were an interesting precursor to the Trump administration’s call for a review of regulation in the financial services space. One of the significant changes in the proposal is the elimination of the requirement that... Read More

That’s your limit!

As is so often the case with some of the lengthy documents that make up the Shakespearean drama that is the MiFID II implementation, the devil is in the detail. The technical standards on position limits for commodity derivatives are a good example. Right at the very end, just before President Juncker’s imprimatur, is a little tidbit suggesting that competent authorities will... Read More

A calmer approach to position limits

As we edge ever-closer to MiFID II implementation, the position limits debate is once again underway in Europe. Under the new rules the UK regulator is required to impose position limits on all commodity derivatives listed on UK trading venues. In its Consultation Paper the FCA states: “The aim of the new regime governing commodity derivatives trading in MiFID II is to prevent... Read More

ESMA sheds light on dark trading caps

ESMA today published its first Q&A on MiFIR transparency topics which focuses on the double volume caps (DVCs) in equity markets and clarifies how markets can transition to the new DVC regime. The document outlines how to calculate the market share of non-transparent trading for instruments only coming in scope under MiFID II (think ETFs, for example). ESMA will make the assumption... Read More

Tumbling down the rabbit hole

With much of the MiFID II Level 2 text close to being finalised, the markets continue to dive even deeper into the details and home in on Level 3 material, such as the Q&As and ESMA guidelines. One such detail lies in the phrase “traded on a trading venue” which is used in MiFIR to define instrument scope for topics such as pre- and post-trade transparency, systematic... Read More

Light relief for dark pools – but for how long?

The dark pool debate has raged across the globe for some time now and, in every jurisdiction, it’s more often than not accompanied by a smattering of assumptions on almost everything and certain knowledge of almost nothing. Fair enough, in the absence of hard facts, the term dark pool doesn’t really instil a great deal of trust from the outside world. But this lack of... Read More

RegAT – round 2

Regulation AT forges ahead, this time with a Round 2 panel convened on June 10th at which the CFTC focused the discussion on five major sticking points: 1. Amendments to the proposed definition of direct electronic access (DEA) 2. Quantitative measures to establish the population of persons 3. Alternatives to require each person defined as an “AT Person” to implement and utilize... Read More

CFTC keeps source on the menu

Open commentary for Regulation AT is now officially over, and while the CFTC mulls over the mostly cautious responses there is some time to reflect on how best to prepare for enforcement of the rules. However, the loftiest piece of proposed legislation in the carte de jour isn’t about futures or traders at all, but the underlying source code of the systems associated with them,... Read More

A brief history of on/off-exchange

Hailed by legislators as the new framework to close loopholes, MiFID II will see OTC trading face new restrictions, most importantly in the form of the Systematic Internaliser (SI) and the new trading obligations. As the fog slowly lifts, it’s becoming apparent that these new restrictions could impact market structure in surprising ways. A more detailed analysis shows that... Read More

All ‘ayes’ on RegAT

Last week, following an open meeting on the subject, the CFTC’s motion to move forward with its proposed Regulation on Automating Trading (RegAT) was passed unanimously by 3 to 0. Following a brisk set of opening remarks by Commissioners Bowen and Giancarlo, and a statement by Chairman Massad, the Division of Market Oversight valiantly attempted to present a case for the CFTC... Read More

A second chance for the SI?

Looking back at MiFID I, the Systematic Internaliser (SI) didn’t really take off, resulting in a meagre 1-2% market share in the FTSE 100 today. Many EU countries had different models to execute or internalise order flow, leaving the SI model on the shelf like a dented can of beans. Under MiFID II, Brussels will take a stricter approach by introducing quantitative SI thresholds... Read More

MiFID II data disaggregation – be careful what you wish for!

Under MiFID II pre- and post-trade data is required to be made available in an unbundled fashion – ultimately the regulator is aiming to drive down data costs. So where trading venues sell their pre- and post-trade data in the same ‘package’ they will be required to also make it available separately at a reasonable cost. Setting aside the cost discussion, the whole... Read More

Flagging on the road to transparency

With its aim of increasing transparency around execution quality, under the current draft technical standards MiFID II will require investment firms to provide an annual execution quality report that states, for the top five execution venues, the share of passive and aggressive orders executed by the broker. In many cases the exchange provides a passive/aggressive flag on the trade... Read More

ESMA stops short of a no-action letter

Having taken several years to get through the review of MiFID, it was interesting to hear from ESMA chair Steven Maijoor last week that there is an appetite to “explore the mechanisms to address regulatory adjustments in a flexible and agile manner”. Neither national authorities nor ESMA have any tool like the ‘no-action letter’ employed in the US. Given that the rules... Read More

Left in the dark

Currently, it doesn’t really matter whether dark trades are executed under the reference price waiver (RP), large in scale waiver (LIS) or a negotiated trade waiver (NT). However, under MiFID II, the waiver flavour will make a significant difference. Whilst RP and parts of NT will become subject to the clunky double volume cap, LIS will not, so we may expect to see an increase... Read More

Change is the only constant

The unbundling of payment for research is a top concern for the industry. There seems to be general acceptance that, one way or another, Europe is set on the soft dollar research market becoming a hard dollar one by January 2017. Despite calls for more clarity and the recent publication of the FCA discussion paper on the regime, opinion remains divided as to how the use of CSAs... Read More

Holding a steady course

Having spent the last three months buried under a deluge of MiFID II consultation pages, the real world looked quite different when I came up for air recently. Since ESMA published the consultation back in December, Greece has elected a new prime minister, Star Trek has sadly lost the original Mr Spock, Madonna fell off a stage and a whole new season of House of Cards is available... Read More

On a quest for answers in Paris

Travelling to Paris today for tomorrow’s open hearing on MiFID II, the two issues I’ll be mulling over on the Eurostar will be record keeping for trading venues and transaction reporting. Both could potentially trigger significant changes in front and middle office workflows for many trading firms. At the core of my concerns lies the requirement for trading venues to... Read More

One step forward, one step back

Market making, at its core, is a simple exchange where the market maker gives immediate liquidity and takes the bid/ask spread in return. This is set to become much more complicated in MiFID II as ESMA is mandated to introduce market making obligations. Under ESMA’s latest draft investment firms using algorithmic trading for market making for at least 30% of the available trading... Read More

Return of the concentration rule

A long time ago in a galaxy far, far away… It is a period of calm, with primary exchanges enjoying relatively little competition thanks to concentration rules enforced in many EU countries requiring all equity business to be conducted on exchange. The arrival of a new disruptor, in the form of MiFID I, is about to turn their lives upside down forever. The blanket ban on concentration... Read More

No time for sentimentality

Whether it’s Windows 8, OS X 10.10 or Android 5, modern life beats to the drum of big software releases. Since any new EU regulation includes an automatic review clause, financial markets legislation is already following a similar pattern. With the ink barely dry on ESMA’s latest technical advice and consultation for MiFID II, it’s not a question of if we’ll... Read More

Slave to a label?

ESMA has just published a report on high-frequency trading (HFT) activity in EU equity markets. It’s good to see the regulator producing an empirical study on such a hotly-debated and emotive topic. Taking a sample of European stocks, and applying two possible definitions of HFT, ESMA estimates that between 24% and 43% of value traded is done by HFT. This sounds like a nice... Read More

Synchronising regulation

US securities industry regulator FINRA recently implemented new time-stamping rules, a topic also on ESMA’s MiFID II task list. FINRA requires US firms to express time in milliseconds when reporting trades to the FINRA facilities and order events to OATS, while ESMA’s proposal wants HFT firms to timestamp records to the nanosecond. That’s a whopping one million... Read More

Turning down the heat on dealing commission

As the FT reported earlier this week, ESMA is set to step back from imposing a much contested overhaul of dealing commission. The scrutiny of commissions has been a major concern for the buy-side, in particular ESMA’s proposals to classify all but the most generally available investment research as a non-monetary benefit. This effectively implies the ‘unbundling’... Read More

Refocusing on auctions

BATS Chi-X Europe recently announced plans to introduce opening and closing auctions for ETFs, while the LSE plans to introduce an intraday auction for all SETS equities. Although these moves differ in instrument scope, they seem to have a common aim. The buy-side has long complained about the increasing difficulties of executing large block trades. With the new double volume caps... Read More

More rules, more problems?

Fixed income, commodity and currency (FICC) markets are dominated by the big boys, the professional traders and investors. In this proverbial ‘champions league’ of markets, retailers are restricted to cheering from the side-lines. Perhaps because it has been assumed that these highly sophisticated professional traders can fend for themselves, the regulators have not... Read More

Hedging swaps with futures: a thing of the past?

As the industry continues to speculate on the trajectory of the swaps market, what’s in store for the final package trade exemption expiring on November 15, 2014, when packages consisting of swaps against futures (so-called ‘invoice spreads’) must be traded on a SEF? The problem with invoice spreads is that the futures component (typically treasury note futures)... Read More

El mañana is here

Last week I was in the beautiful city of Madrid, where besides analysing the impact of upcoming MiFID II regulation, I’ve been catching up on the Spanish Market Reforms. The upcoming changes, aka La Reforma, promise to align the Spanish market with European peers and improve competitiveness. Spain’s clearing, settlement and registry system overhaul is being tackled in 2 phases,... Read More

Pre-emptive compliance

MiFID II brings with it some significant changes to the Systematic Internaliser (SI) regime. Most importantly, ESMA will introduce quantitative thresholds that determine when a firm is obliged to obtain an SI licence. Given that these thresholds are based on average values across the previous quarter, it all looks pretty sensible and most likely to impact only the larger firms.... Read More

Money Market Funds – what cost safety?

Tomorrow the SEC’s five member Commission is expected to vote on new changes to rules for money market funds (MMFs), but will the changes be safer or costlier? The two main changes will see ‘prime’ funds move to a floating NAV and boards permitted to impose redemption fees or even suspend redemptions on a temporary basis. This is all designed to make MMFs less... Read More

Tour de Force

The current MiFID II consultation is infamously complex, covering 800 pages and 800 questions to be answered in 8 weeks. If that in itself is not enough of a challenge, ESMA invited all market participants to Paris this week for a two-day Tour de Force, aka public hearing. Be it equity, non-equity, pre- or post-trade transparency, SIs, OTFs, trade reporting, third country regimes,... Read More

History doesn’t repeat itself, but it does rhyme

While I’m not suggesting that history is repeating itself, there are certainly some interesting similarities between MiFID I and II. With its focus firmly on equity markets MiFID I saw a number of new ventures (Chi-X, BATS, Turquoise, Quote MTF, NYSE Arca Europe and others) line up to capture a share of the European markets. With MiFID II now encompassing derivatives markets... Read More

What role for OTFs?

Last week the CFTC published another no-action letter with respect to trading swaps on a European MTF. At the heart of the discussion is the question of whether European MTFs can be considered as equivalent to US SEFs. Given that a number of banks within the scope of Dodd-Frank also need to trade swaps within Europe, this is an important issue. In Europe, the discussion around swaps... Read More

A consolidation of data?

So what does MiFID II finally say about the consolidated tape? If you remember the story so far, a number of Consolidated Tape Providers, or CTPs – each authorised to operate the data reporting services – are supposed to compete to provide said tape. And if you ever wondered what the collective noun for a group of CTPs is, it appears to be ‘an authorisation’.... Read More

Reporting, reporting, and yet more reporting

While many European firms are still getting to grips with EMIR trade reporting and the headaches it’s caused, the next reporting challenge is already on the horizon in the form of MiFID/R. It helps that MiFID/R does not require double reporting as long as the required information is reported once under EMIR. However, aiming to strengthen transparency, the scope of MiFID/R’s... Read More

Prepare yourself, MiFID II has arrived!

Yesterday the Council of the European Union published the long-awaited texts for MiFID II and MiFIR as agreed by the Council and the Parliament on 14th January. Whilst the texts are still subject to ECON and Plenary votes in March and April, and the Commission has some outstanding concerns about the derivatives rules, it’s likely we will all have to implement the rules outlined... Read More

SEF and agency make a perfect MATch

From next Tuesday, February 18th, US market participants will be required to trade fixed-floating interest rate swaps denominated in dollars or euros for standard benchmark tenors on a SEF. Long part of Dodd-Frank’s Title VII statute, this trade execution mandate now comes about and follows the CFTC’s certification of Javelin’s MAT submission last month. During... Read More

Trading safety measures pay off

The eagerly awaited final MiFID II text potentially includes regulation around circuit breakers. Yesterday Eurex saw trading in the FDAX drop by 2% within minutes of an ECB announcement, only to recover shortly after. It’s safe to assume that the circuit breaker prevented a more serious situation. Even with a reliable and secure market structure and tightly defined corridors,... Read More

The whole package

The CFTC continues to approve MAT self-certifications, most recently Tradeweb’s. Arguably the certified products are fairly standard, but in certifying Javelin’s MAT submission the Commission left the door open for package transactions to be caught up in the trade execution mandate. The industry (notably the Managed Funds Association in its comments to the Commission)... Read More

Keeping SEF doors open

The CFTC has come out strongly in defence of the open, impartial nature of SEFs, as envisioned by Dodd-Frank. In a letter issued last Thursday it warns SEFs not to use “enablement mechanisms” to control access to their markets, or to control which participants interact with one another on their platforms. It also warns against engaging in “prohibited discriminatory... Read More

Get with the programme

Electronic trading of swaps will soon be mandatory and industry participants need to get ready. Javelin kicked off the process on October 18th, filing its MAT (Made Available to Trade) submission with the CFTC for a broad range of interest rate swaps, including spot and forward starting swaps and variable notional swaps, with tenors ranging from 1 month to 51 years. Or, as one participant... Read More

Meaningful manoeuvres in the dark

Dark pools around the globe are under constant regulatory scrutiny. The Australian and Canadian regulators now require dark trades to offer meaningful price improvement over lit markets. While Brussels-based technocrats still toy with the idea of volume caps, a recent open letter from a large group of industry representatives lobbied for the “meaningful improvement”... Read More

Swaps regulation arrives – with a bang and a whimper

The swaps industry has for some time been fixated on October 2nd, the final date for compliance with SEF rules. But really the key date for market participants is when MAT (the “made available to trade” rule) kicks in and that, according to the industry consensus, is not likely to be before February 2014. With many of the 19 new SEFs only submitting their applications... Read More

Looking through the CFTC’s prism

The CFTC’s recent Concept Release on Risk Controls and System Safeguards for Automated Trading Environments represents a watershed moment for US derivatives markets, setting the stage for a new regulatory approach to electronic trading. The CFTC’s role and powers have already been greatly enhanced, post-Dodd-Frank, through a combination of the new market abuse powers,... Read More

A lose-lose situation?

There are currently 15 SEF applications lodged with the US CTFC at various stages of registration. With experience in other asset classes showing that while many new entrants may emerge only a few will succeed, many in the industry are wondering which of these new SEFs will make it beyond their first birthday. Even for those that do survive there’s no guarantee of a profitable... Read More

Next Stop St. Petersburg

Back in 2009, in the wake of the financial Armageddon, world leaders pledged in their G20 commitment in Pittsburgh that all standardised OTC derivative contracts should be traded on a platform and centrally cleared by the end of 2012. Fast forward four years and the next G20 summit takes place in St. Petersburg, Russia at the end of this week – the first meeting since the... Read More

If it looks like a duck…

Dividing derivatives contracts into over-the-counter and exchange-traded would seem to be a simple task, but this is far from true. Thanks to EMIR’s definition of ‘on-exchange‘, contracts that are traded on anything other than a regulated market (RM) will be considered OTC regardless of whether they are traded on an MTF or are economically equivalent to the on-exchange... Read More

Uncertainty abides amidst a flurry of CFTC activity

It’s a busy – not to mention dramatic and uncertain – time for U.S. derivatives regulation. Consider the milestone of final SEF rules and yesterday’s “Category 2” clearing deadline. Consider, too, the on-going uncertainty as to the pending expiration of the exemptive relief on Dodd-Frank’s cross border rules (also known as ‘extra-territoriality,... Read More

Half a job

MiFID, the mother of all European financial regulation, rumbles on and on. The European Commission’s MiFID II consultation in 2011, the Ferber Report in March 2012, and the European Parliament vote in October 2012 were all highly anticipated and widely reported on. But despite the fact that the Council of Ministers has published more than 20 different drafts during the Cyprus... Read More

Time to get comfortable with SEFs

The CFTC’s 29th meeting on Dodd-Frank rules, held in Washington, D.C. on May 16th, has been widely covered in the financial press. Final SEF (Swap Execution Facility) rules – including the so-called “Made Available to Trade” (MAT) rule – and minimum block sizes for swaps (among other rules) were approved by the Commission. Despite controversy, it’s... Read More

Buy-side steps up

With financial markets focused firmly on risk reduction – a key priority for the G20 – the buy-side is turning its attention to the issue of counterparty risk. This parallels well with the OTC clearing requirements set out in the Dodd-Frank Act. In a reaction to the perceived risk inherent in trading leveraged instruments without adequate safeguards, the regulators stepped... Read More

Swap your workflow

We’ve discussed the current course of regulatory change, specifically Dodd-Frank here in the States, and alluded to the “total set of changes the derivatives industry is going to go through”. But one thing is clear, the interrelationships between buy-sides, sell-sides (FCMs and swaps dealers, executing and clearing brokers) and CCPs is going to get increasingly... Read More

One firm, two guv’nors

Making a living as a market maker is no easy task these days, with low trading volumes and the increasing regulatory burden tending to wipe the smile from many a trader’s face. Market making certainly has some perks, though, with exemptions from the European Short Selling Regulation, UK stamp duty and the Italian Financial Transaction Tax. Then again, where the MiFID II draft... Read More

Stop/start for Dodd-Frank’s swaps rules

The Dodd-Frank Act, nearly three years old this summer, continues its slow, inexorable pace of implementation. In some respects, the financial landscape has changed unequivocally; in others, the final results of change remain to be seen, as the industry awaits additional rulemaking. Most of the current regulatory milestones impact only participants in the OTC swaps markets, but... Read More

Just when I thought we were out, they pull us back in

Since 2007 many of us in the industry have been attempting to iron out the inconsistencies (and confusion) introduced by MiFID around the use of venue of execution (VoE), Market Identifier Code (MIC) and Last Market (FIX Tag 30). In May 2012 FPL’s Buy-Side Working Group published its best practices for execution venue reporting, supporting the use of standard MICs on execution... Read More

Extraterritoriality agreement – maybe today, maybe tomorrow…

Extraterritoriality agreements for cross-border OTC derivatives have been hotly debated for a while now, but there have been few visible signs of progress in recent months. Last week the Chairman of the US SEC, Elisse Walter, presented her views on the complex area of equivalence and reciprocity. In her speech she referred to the problems that domestic regulators would face if forced... Read More

If it moves, tax it!

The proposal for a Directive implementing enhanced co-operation in the area of financial transaction tax (aka the EU FTT), with its eye-wateringly broad scope, will have to be churned through the legislation mills PDQ if it’s to meet its overly ambitious timeline. The would-be tax applies to all transactions where a counterparty is established in one of the 11 participating... Read More

A cry for help

More and more industry representatives are complaining about the politicisation of the rule-making process in financial markets. In Europe, politicisation has triggered some absurd episodes, such as the proposal for the greatest uncontrolled financial market microstructure experiment in the world (aka the minimum resting period of 500 ms) and the introduction of short selling bans... Read More

Consolidated tape – work continues

After endless discussions all over Europe, there is still massive confusion as to which European Consolidated Tape (ECT) model MiFID II will bring and when. Despite the uncertainty, the creation of a consolidated tape for equities remains firmly in the MiFID II text and on the buy-side’s wish-list. Behind the scenes of the ever-lengthening MiFID II timeline, and regardless of... Read More

MAD as a March hare

The reviews of the Market Abuse Directive (MAD II) and proposed EU Market Abuse Regulation (MAR) continue to run their course through the European trilogue process, with final Level 1 agreement expected to keep pace with the MiFID review spanning out into the second half of 2013. MAD II and MAR will bring increased obligations on firms, including criminal sanctions, in the event... Read More

CAT’s eyes on the US market

While Europe still doesn’t have a consolidated post-trade tape, US regulators are moving forward with an ambitious plan that will eventually provide them with a detailed view of the entire market, readily available on a next-day basis. After the usual drawn-out process to approve SEC Rule 613, the industry has started work on the Consolidated Audit Trail, or CAT. The SEC has... Read More

You can’t have your cake and eat it

Extraterritoriality agreements are important for many firms because they can reduce the burden of redundant and conflicting rules across different countries. Last November, considerable concerns were voiced by numerous regulators around the globe with regard to the CFTC Cross-Border Guidance relating to the US swap markets. Among the protestors were representatives of the European... Read More

Italian uncertainty continues

On 21st February, just days before Italy’s general election, Economy and Finance Minister Grilli signed the application decree for the Italian Financial Transaction Tax (FTT) ahead of its effective date of 1st March. Arguably, the decree is in breach of another Italian law, the “Statuto dei diritti del contribuente” (Statute of taxpayers’ rights, Law 212/2000),... Read More

Bless me, Father, for I have changed my algo

Managing algorithmic trading will become more difficult in the future. Regulators have already suggested in recent drafts of MiFID II and the German HFT Act that algos need to be registered/earmarked and their functionality reported to the competent authority if requested. The European Parliament (EP) takes the requirement a step further in its draft in Article 10a in MAR. Here,... Read More

Pick a model, any model

Anyone reading the recent Presidency compromise MiFIR texts (published 4th and 13th February) can see that the subject of European Consolidated Tape (ECT) features again. The Council is now opting for appointment of one entity to collect trade reports and consolidate the data into a tape. Sound familiar? Dipping into the Regulation Matters Back catalogue I fished out the 3 operating... Read More

Is FTT heading for Wall Street?

Over the past few months, many in the US trading community have been quietly mobilizing against European Financial Transaction Taxes being collected within US borders. The voice of opposition grew louder yesterday with the Security Traders Organization (STA) calling on market participants to take action by communicating to their elected representatives their “strong opposition”... Read More

La bozza del decreto

Italy’s Ministry of Economy and Finance published a draft of the decree for the Italian Financial Transaction Tax (FTT) just after the 31st January deadline imposed by the law (for an English translation visit our Raw material section). The decree sheds light on most of the dark corners left by the bill, detailing how charges are to be calculated, who is responsible for their... Read More

Coming soon – UK regulation with a whole new cast!

The number of mega blockbusters on the regulatory agenda this year would warrant their own awards ceremony. Whether it’s drama or comedy you’re after, there is certainly a regulation to suit every taste. One of my picks is the new UK regulatory structure epic Journey to the FCA (FSA, October 2012). Born out of the UK Financial Services Bill, the FSA will evolve into a new regulatory... Read More

Better consult…

Drafting new legislation is difficult and consulting the industry beforehand is sensible. Granted, where financial transaction taxes (FTT) are concerned this is tricky because no practitioner has anything good to say about it. However, beyond the mere purpose of FTT, the operational implementation is at least equally important. The current Italian FTT law has a number of issues... Read More

Dude, where is my level playing field?

At the heart of the European Union is the concept of a single market with a level playing field. Markets moving together, where trade and competition create benefits for everyone. Back in 2007, MiFID was a true testament to this when it introduced the idea of passporting regulatory oversight across Europe. Reading the latest regulatory news, there’s precious little to remind... Read More

One cliff avoided, another straight ahead!

The Italian Financial Transaction Tax (IFTT) passed into law over the Christmas holidays and shocked market participants around the world. Quite apart from the increase in tax levels compared to earlier drafts, the Italian government has invented an additional HFT tax based on the value of amended or cancelled orders (click here for more details). The French markets, luckily, didn’t... Read More

The state of play

As the Council of the European Union hands over to Ireland for the first trio of the 2013-2014 Presidency rotation (1st January 2013 – 30th June 2013), the outgoing Cyprus Presidency published a progress report on MiFID II / MiFIR on 13th December. This report outlines the current status of the compromise proposal negotiations, pointing out the main areas where Council agreement... Read More

Here comes the CFTC: the regulators keep coming back for more

The latest batch of rules from the US Commodity Futures Trading Commission (CFTC), which come into effect on December 31, 2012, will require many firms currently outside the CFTC’s supervision to register as Commodity Pool Operators (CPOs). A new exemption test – the de minimis test – will need to be applied by firms daily to check their levels of commodity interest against... Read More

Extraterritoriality reality?

Legislators and regulators all around the globe are rushing to meet the G20 commitment of shifting all standardised OTC derivative contracts onto exchanges or electronic trading platforms. Naturally, every country is trying to clean up its own backyard before looking across the fence at its neighbour’s. The disadvantage of this approach is that country-specific rules might... Read More

Sensible timeframes please!

The final text of EMIR (European Market Infrastructure Regulation) entered into force on 16th August and the next milestone for ESMA, to complete the Level 2 text by the end of September, is fast approaching. ESMA’s consultation on the draft technical standards received over 130 responses before the 5th August deadline. Whilst there is general support for the key aims of EMIR,... Read More

Ready, set, go!

France’s AMF has published a brief statement spelling out the implications of EMIR entering into force in two days’ time. In terms of timelines these are the most important dates: August 16th, 2012 – EMIR enters into force September 30th, 2012 – deadline for ESMA to transmit EMIR technical standards to the European Commission July 1st, 2013 – Earliest possible... Read More

School’s out!

OK, school’s out and the head’s advice was “…don’t do anything silly, and come back refreshed and ready for the new challenges of next year.” The European Parliament is also on its summer break and the next ECON Committee vote on MiFID II is scheduled for 26th September, with a plenary vote on the calendar for 19th  November.  There remains, however, a whole lot of... Read More

Dodd-Frank: Implications of the latest swap definition rule

Following the CFTC’s recent approval of a swap definition lawyers and the OTC derivatives industry are busy digesting the 600 page ruling. In effect, this kicks into motion an October 2012 timeline around the implications of two very significant previously defined rules for the regulation of OTC derivatives: Swaps defined by this rule must be cleared; and Swaps defined... Read More

Lost in translation

Yesterday the CNMV (the Spanish regulator) and CONSOB (the Italian regulator) banned any short selling (naked or covered) in their respective markets. It is becoming more and more difficult to believe that these bans are imposed as a measure of good market regulation and not due to unrelated political considerations. On that point, a new study by Ian W. Marsh and Richard Payne analysed... Read More

The horse hasn’t bolted, yet!

The Flash Crash catapulted circuit breakers into the public spotlight and showed how they (or rather the lack of them) can impact financial markets. Since then, in Europe at least, discussions have been relatively quiet. European markets are perhaps less prone than others to such massive price swings for two reasons. Firstly, Europe does not have the trade-through rule and, secondly,... Read More

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... 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... Read More

A butterfly effect in the making

In a recent speech, Andrew Haldane (Executive Director, Bank of England) makes a strong and convincing case that the proposed global Legal Entity Identifier (LEI) and the Unique Product Identifier (UPI) will have the largest impact on the financial industry in the current regulatory overhaul. The LEI and UPI are introduced in a recent CPSS IOSCO paper on “OTC derivatives data... Read More

Another kind of movie night

Let’s face it, a meeting of the Committee on Economic and Monetary Affairs (European Parliament) regarding MIFID II and EMIR is hardly a topic suitable for a movie night. So I wasn’t really that excited to watch their latest discussions on Monday evening in Strasbourg via the internet. However, after seeing the new MiFID movie poster, I was inclined to tune in and watch some... Read More

Down with opacity and shady deals!

Following the MiFID II roadmap a significant milestone was reached in Brussels last week with the final text of EMIR (European Market Infrastructure Regulation) agreed on 9th February. After 2 years of European Parliament debate this will bring to an end “the era of opacity and shady deals”, according to Michel Bernier the EU commissioner! EMIR is one part of the history-making... Read More

Reshaping the OTC derivatives market

Many thanks to our colleague David Petersons for the following interesting observations: While much remains to be resolved through rule-making, this Capco article discusses the impact of the Dodd-Frank Act on OTC derivatives, outlines the key elements of the Act affecting OTC derivatives trading and provides an update on where the rule-making stands. The predictions about four possible... Read More

Copyright © 2018 Fidessa group plc. All rights reserved.

The information contained within this website is provided for informational purposes only. Fidessa will use reasonable care to ensure that information is accurate at the time it is made available, and for the duration that it remains on the site. The information may be changed by Fidessa at any time without notice. We also reserve the right to close the website at any time. No representation or warranty, expressed or implied, is given on behalf of Fidessa or any of its respective directors, employees, agents, or advisers as to the accuracy or completeness of the information or opinions contained herein or its suitability for any purpose and, save in the case of fraud, all liability for direct, indirect, special, consequential or other loss or damages of whatever kind that may arise from use of the website is hereby excluded to the fullest extent permitted by law. Any decisions you make based on the information in this website are your sole responsibility and information on the website should not be relied upon in connection with any investment decision.

The copyright of this website belongs to Fidessa. All other intellectual property rights are reserved.

Reproduction or redistribution of this information is prohibited except with written permission from Fidessa.