Get it done, while you still can

When the double volume cap (DVC) was first enacted on 12th March it cut nearly half of dark turnover in Europe. After a 6-month mandatory break all of the suspended stocks have now been allowed to re-join the general population. Early evidence suggests that overall dark trading has now resumed at roughly pre-suspension levels. Our Top of the Blocks report shows that this resumption is not down to block trades, suggesting that there is a preference... Read More

Time to change your default settings?

London has long been seen as the European capital for financial markets. This has very little to do with regulation – after all, the UK is (still) part of the EU single market. London’s continuing dominance is largely down to ‘network effects’, i.e. the positive benefits of being part of an established ecosystem (in London even the cabbies discuss the impact of MiFID II with you!), and ‘lock-in effects’, i.e. the barrier... Read More

Joining the fray

It was always clear that Brexit was going to be an inherently complex undertaking that the industry must muddle through somehow. By now we’re all quite used to politicians of every stripe selling us their promises and claims, ranging from the more realistic to the less credible. What’s different this week is that the regulatory authorities have now waded in to the argument. As my colleague noted yesterday, the EBA claimed that banks’... Read More

The hard reality of Brexit

Whichever type of Brexit you hope for, there remains the possibility of a UK withdrawal from the EU in March next year with no agreement in place, and no transition period. The European Banking Authority has this week voiced its concerns about what it sees as a lack of preparation on the part of financial institutions for such a scenario. But in fact some banks and brokers are already setting themselves up for a hard Brexit by doubling up on legal... Read More

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 specific suspense accounts is permitted, and their usage has specific... 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 Europe? Or will everything continue much as it is today? Unfortunately... Read More

Bracing for Brexit

There are very few things we can be certain of in regard to Brexit, other than the fact that it won’t be concluded in 2018. It would be premature, though, to dismiss Brexit as topic solely for the policy makers sitting in their ivory tower far removed from the technology and operations that keep financial markets running smoothly on a daily basis. UK regulators have already asked firms to come up with contingency plans for a worst case scenario.... 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 of 755 ISINs are going to be capped due to the 4% or 8% thresholds starting... 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. Even though ESMA’s list seems incomplete (where are the Swedish... Read More

Regulatory placebo effect

With great anticipation the industry awaits the announcement of the estimates for the double volume caps, now expected in March. Irrespective of the fact that ESMA has already missed one deadline, and with some in the industry waiting to see if there is any substance to a rumoured further delay, it’s evident that the looming caps have already impacted trading behaviour. The double volume caps aim to restrict dark trading, making it less attractive.... 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, shares with a high ADT are deemed liquid by ESMA, and those with a... 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 regime. The guidance states that a third-country venue will be considered... Read More

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