Uber transparent?

ESMA has today published the latest Q&A on investor protection. The document spans many different topics, but what sparked my interest in particular are the comments around the best execution quality reports. Under MiFID II brokers have to publish their top 5 execution venues. Firms trading as non-members (i.e. via another broker) are asking whether it is the exchange or the... Read More

ESMA sets a date for SI compliance

Intended to promote practical convergence and common supervisory approaches and practices, like EMIR and MAR before them, the MiFID II Q&A is fast becoming a favourite on my browser. In its recent Q&A on transparency topics, for example, ESMA has clarified for those firms wondering if, when and how to become a systematic internaliser (SI) that they will have until September... Read More

Best ex transparency moves to the next level

The draft technical standards for MiFID II require exchanges to publish quarterly execution quality reports (RTS 6). Sell-side firms are expected to digest these and update their best execution policies accordingly. Additionally, sell-sides must publish their own execution quality reports annually (RTS 7), which obviously should be digested by the buy-side. While sceptics might... 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

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

Are we nearly there yet?

There has been a small flurry of activity this week around the subject of a European consolidated tape, but is the fog starting to clear yet? Let’s take a closer look at the facts. The parliament adopted text of MiFID II calls for an effective and comprehensive consolidated tape to be in operation as soon as possible. The scope is post-trade data for equities and equity-like instruments,... Read More

And the winner is … a compromise!

Whoever said the political processes to formulate MiFID II and MiFIR were complicated and boring? Look at it from the right angle and it can be every bit as exciting as the knockout rounds of a FIFA World Cup tournament. In the World Cup football teams compete against each other and only the winner progresses. The last team remaining in the competition takes home the trophy. Politics,... Read More

Good intentions – bad results

Lobbying  in Brussels can be such a dirty business. Hidden agendas and vested interests are dominating the daily business. Thus, I was very pleased when Finance Watch (a non-industry lobby group, the lobbying arm of Occupy Wall Street, if you will) engaged in their mission to “making finance serve society”. However, the dream of a better world was crushed last week... 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... 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

MiFID II should be a priority for every financial firm

There were two recurring MiFID II issues discussed at TradeTech Liquidity (24th Nov): the new OTF category does not fit the riskless principal/dual capacity model used by firms facilitating agency client order execution on existing broker crossing systems – business models will all have to change! According to Kay Swinburne the number 1 issue for the Rapporteur, for the... Read More

Plenary Meeting of the MiFID Forum 30th November

The MiFID Forum is made up of industry standards bodies and trade associations (SIIA/FISD, FIX Protocol, ISITC Europe and TWIST) affected by MiFID.  It provides an opportunity for open discussion and debate amongst market practitioners from compliance and operational areas on issues affecting the financial markets. A plenary meeting of the MiFID Forum was held on 30th November... Read More

MiFID II Digest

While the 10 key takeaways from MiFID II may have given Steve indigestion, we are busy tucking in to the smörgåsbord of recently published MiFID II documents and snacking on all the published articles on the subject. From my reading so far, most looks as expected from the previous version that was leaked in August, with the following worthy of note: Organised Trading Facilities (OTFs)... Read More

ESMA – Waivers from Pre-Trade Transparency

The aim of this document, published by ESMA (10/08/11), is to provide guidelines under the existing MiFID directive for competent authorities around the application of Waivers from Pre-Trade Transparency for Regulated Markets and MTFs.  Some examples of waivers granted by national competent authorities, considered at CESR or at ESMA level, are included for illustration purposes. Under... Read More

MiFI Leaks!

With reports of a draft of the revised Markets in Financial Instruments Directive circulating in Brussels in recent days, I’d like to bring you up to speed with how we are progressing in the MiFID II back-shop! We are now looking at a marked up copy of Directive 2004/39/EC – the revised Directive a new Regulation (ref tbd) that establishes uniform requirements in relation... Read More

Murky waters run deep

Why are politicians so obsessed with bringing transparency to the European post-trade regime? MiFID II is very much focused on fixing all the unintended consequences that followed the implementation of the MiFID directive in 2007. The fact that the original regulation allowed the publication of OTC trading on websites and the fragmentation of trading without the construction of... Read More

What will MiFID II do with transaction reporting rules?

In the latest of my PMQs I look at Transaction Reporting, covered in Chapter 6 of the EC’s Public Consultation paper on the Review of MiFID. Transaction reporting is usually a back office function. However, any change in this area could have an impact on the data that Fidessa needs to capture and store in the front office. Fidessa also has a hosted transaction reporting component... Read More

If it ain’t broke, don’t fix it!

Brokers sometimes use delayed reporting to reduce market impact for large equity trades given to them by buy-side clients on a risk basis. Currently, trade reporting can be delayed for between one hour and three days, depending on the size and liquidity of the stock, but the proposed new regime could impose a maximum delay of one day. Providing transparency to help in the construction... Read More

The pain of ill-fitting shoes!

A 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... Read More

What will MiFID II do to improve pre- and post-trade transparency?

The second in my series of PMQs looks at the key aspects of pre- and post-trade transparency covered in the EC’s Public Consultation paper on the Review of MiFID. The lack of reliable price information potentially increases the cost for investors to operate in the market. It can also discourage trading in a particular instrument with a consequent impact on liquidity. The ability... Read More

Freaking out about market abuse

The behavioural economics book, Freakonomics, includes a chapter entitled Why do drug dealers still live with their moms? which talks about ‘foot soldiers’, small street crack dealers in Chicago. These individuals, apparently, have a one in four chance of getting killed and they will be arrested around six times during the course of their ‘careers’. All these... Read More

Xavier Rolet says MiFID II could threaten London

Xavier Rolet, CEO of LSE Group, expresses concerns over some MiFID II proposals and support for dark pools. Do you agree with Xavier that London’s competitive position will be adversely affected by MiFID II? Or do you think other factors, such as the higher UK taxation rate, will have a greater effect? Read the article and let us know your thoughts - leave a comment in the... Read More

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