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 notifications and stating that the actual destination where the fill was executed should be relayed (e.g. separate MICs for lit/dark order books). The recent changes to the ISO 10383 MIC now provide a clear link between related MICs.

However, the latest MiFIR draft introduces a new requirement to identify on a transaction report the applicable waiver under which the trade has taken place. I’m wondering how this would be implemented?

Some venues may generally be recognised as operating under a specific waiver as part of their business model (BATS Chi-X Europe’s Dark Order Book, for example), but it’s not always possible to identify all the waivers in use. The BATS Chi-X Europe lit book, for instance, allows for hidden (large in scale waiver) and iceberg orders (order management waiver). How is it possible to determine whether I’m part of a transaction under those waivers?

Just when it looked like some real progress was being made, MiFIR looks set to introduce yet more layers of complexity to the trading workflow! On top of that, it’s arguable whether this latest requirement will actually provide the evidence ESMA is looking for to determine if the use of a waiver is, in fact, harmful to price formation.

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