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.... 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

Putting MiFID II into practice

As firms march headlong towards 2018 the detailed implementation of MiFID II is well and truly underway. Even in the equities camp where MiFID II, remember, is an intended adjustment to existing rules, the practicalities of trade and transaction reporting mechanics are evolving. Whether ESMA ever envisaged such a complex campaign is debatable, but early advocates of splitting MiFID... Read More

SMP checks in the balance

Self-match prevention (SMP) is offered by many exchanges – CME, ICE, Turquoise and BATS among them – and by the more advanced order management systems. In most cases, employing an SMP check is voluntary for trading firms; that is important because not every prevented self-match is also a prevented (illegal) wash trade. Some regulatory jurisdictions require intent as... Read More

Lightening the load

Technology is meant to make life easier. Be it a smart phone, TV or fridge, or even a smart water kettle, they all promise a simpler life. Whether they deliver on that is another matter entirely and the idea that more technology always equals better is debatable, particularly considering that my new bathroom scales tweet my weight every time I step on them. Like the ongoing trend... 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

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

Value for money

The long list of topics to be tackled by ESMA in MiFID II Level 2 is laid bare in the EU regulator’s latest banking and investment services tender document, with submissions due by the end of this week. ESMA is seeking help with data gathering and analysis on a number of fronts, not least in order to specify detailed organisational requirements to be imposed on investment firms.... Read More

The buck stops here

Money markets were rocked in 2008 when the Reserve Primary Fund committed the unthinkable by ‘breaking the buck’ because of its links to Lehman Brothers. This served as a wake-up call and in 2010 the SEC implemented amendments to the 2a-7 regulations which safeguard these types of investments. But many in the industry said they didn’t go far enough and on June... Read More

UCITS V – the debate rumbles on

The European Parliament vote on amendments to the UCITS IV Directive has been delayed. UCITS V, as it will be known, covers three main themes: depositary functions, regulatory sanctions and remuneration requirements. It’s the latter that no one can agree on, with bonus payment caps proving particularly contentious. Sven Giegold, the European Parliament’s Rapporteur on... 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

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

Market standards and the warm embrace of regulators

On 30th October the CFTC held a Public Meeting of the Technology Advisory Committee. Among other things, the possibility of a new Quality Management System Standard for automated trading was discussed. The AT 9000 standard is aimed at market system quality for automated trading in the financial industry. A preliminary timeline tells us that an informal working group started in July... Read More

LEI – how many expert groups does it take to identify an entity?

With the latest progress note from the Financial Stability Board (FSB) on the Global Legal Entity Identifier (LEI) Initiative published last week, it’s a good time to look at the basics. In June 2012, with the backing of the G20, the FSB was tasked with driving forward the LEI initiative to create a universal numbering system to uniquely identify parties to financial transactions. The... Read More

Border politics

There have been a number of articles recently covering exchange and regulator concerns around the effective detection of market abuse in Europe. FESE has recently published a position paper on the review of MAD in which it encourages policy-makers to consider the issue of effective cross-border and cross-venue surveillance. Fragmentation of trading across several venues outside... 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

SEC Large Trader Reporting Rule

Many thanks to Jess Haberman in our New York office for this summary of the SEC Large Trader Reporting rule: In July 2011 US Securities and Exchange (the SEC) Commissioners unanimously approved the Large Trader Reporting rule; the aim is to “… promptly and efficiently identify significant market participants and collect data on their trading activity so that we can reconstruct... Read More

The R word video

If you haven’t yet had the chance to do so, check out the latest FragVision entitled The R word. In this episode Steve Grob gives us an insight into global regulation and shares his views on how highly politicized the whole process is. He suggests market forces should mark the path instead of politicians. Watch the video and participate in our discussion poll. Do you think... Read More

What effect will MiFID II have on market structure?

In the first of our PMQs (Programme Managers’ Questions), I examine the section of the EC’s Public Consultation paper on the Review of MiFID concerned with Developments in Market Structures. With the Consultation Paper, the EC sought market input on a number of aspects of market structure reform – the creation of OTFs (what are these, you may well ask?), automated... Read More