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

Take a break

Financial markets are global and closely interconnected. While this is largely beneficial for all market participants, it can also create spillover effects with unintended consequences. An academic study argues that liquidity can affect related instruments and create a feedback loop, or, put more pessimistically, a vicious circle. In simple terms, if liquidity evaporates in a derivative,... 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

ESMA gears up for implementation

ESMA published a report last week on staffing and resources with regard to EMIR. After many years of public policy discussions and political deals, 2013 will be the year of hands-on implementation. Here are a few highlights from the document: • ESMA expects about 11 applications for Trade Repositories, each likely submitting a document between 200 and 1,000 pages long • ESMA... Read More

What’s in store for the coming year?

The European Commission adopted its work programme for 2013 (CWP) back in October, with the over-reaching aim to deliver financial stability, economic growth and jobs. In terms of new proposals, the CWP announced around 50 new initiatives to be tabled during 2013 and the first part of 2014. According to the EC President, José Manuel Durão Barroso: “The next step must be... Read More

The three (MAD) wise men

I find it rather appropriate this season that the three European bodies – the Commission, the Council and the Parliament (the latter with rapporteur Arlene McCarthy’s version) – are each bearing us a gift. Instead of the traditional gold, frankincense and myrrh, each is bringing its own take on the Market Abuse Directive. These slightly different texts will be... 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

Wave your waivers goodbye

Since the introduction of MiFID in 2007 the concept of the pre-trade transparency waiver has been widely accepted and applied. However, following the latest regulatory discussions, there is a danger that we may have to wave goodbye to some of these waivers with MiFID II. It seems that the regulators feel that the existing waivers are interpreted too loosely and inconsistently across... 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

My Roman travelogue

Separate from the upcoming European Commission proposal for a financial transaction tax (FTT) under ‘enhanced co-operation’, Italy is pushing ahead with its own flavour of FTT, similar to the French tax which came into effect in August this year. It took me longer than I expected to find something sensible about the Italian proposals. Reports in the Italian media were a little... Read More

Is the grass any greener on the other side?

On 30th October the CFTC’s Sub-Committee on Automated and High Frequency Trading Working Group 1 presented its definition of HFT to the CFTC Technology Advisory Committee. This is very interesting, as the European Parliament already published its version on 26th October. Let’s compare notes across the pond. Both approaches define HFT as a sub-category of algorithmic... Read More

The liquidity genie

Following on from the warnings to the contrary from the UK Foresight publication (see previous blog Some things in life are bad…), we have had a reaffirmation (if one was needed) last Friday from the plenary vote that the European Parliament is going to proceed to target speculation and high frequency trading through their new rules and regulations. The magic of the “Liquidity... Read More

Some things in life are bad…

The next step in the MiFID parliamentary process is the EP plenary vote, to gain the backing of the entire house, scheduled for tomorrow, Friday 26th October. The EP is forging ahead, with little likelihood of further changes, it seems, though there is a debate on MiFID scheduled for today. Given where we are in the timeline of the parliamentary process for MiFID II legislation,... Read More

A sensible request deserves a sensible response

The German government and the European Commission want to mandate earmarking of every algorithmic order in order to identify the originating strategy. The reason being that market supervisors have a difficult job keeping up with all those technical innovations in financial markets. In the good old pit trading days traders were restricted by physical limitations, but in a world where... Read More

A health check for dark pools?

Over the past few years, dark trading has been the subject of considerable attention all around the world and its success in growing market share has everyone talking about this phenomenon. When they first came into operation dark pools were embraced as an exciting new way to trade large orders with minimum market impact. More recently, however, with the increased levels of HFT... Read More

Think again, things are about to change!

Do you think a retail broker has to connect to all exchanges in Europe in order to offer best execution? Of course not! MiFID’s current definition of best execution is principles-based and takes into account more than just the execution price, but things are about to change. The latest MiFID II draft from the ECON vote contains a number of amendments that may cause you to... Read More

Brussels’ rules of etiquette

The on-going flood of new regulations and directives coming out of Brussels continues. With all its consultation papers, drafts, technical or implementing standards, recitals and articles, it is hard to keep your head above the waterline. Here are a few pointers to help you structure that paper flood into some more manageable channels. European laws and legislations are formally... 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

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

The consolidated tape’s blind spot

In the US the consolidated tape aggregates trade data across multiple exchanges. However, the consolidated tape does not include trades for less than 100 shares of stock. Looking at this today, it is surprising that such an exception was implemented. In the past such small trades were regarded as retail trades with very little information content, thus they were perhaps not considered... 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

Germany’s “Best of …” HFT law

A Europe-wide consolidated regulatory framework can have many advantages for the financial industry. Laws such as MiFID II, MAD II and EMIR create a level playing field that simplifies competition on a pan-European scale. However, in the last couple of months a number of national legislations have been enacted that make the playing field a bit more uneven, again. There are, for... Read More

Don’t buy it, if it’s not worth it!

Back in May, BATS Chi-X Europe announced that it will start charging for market data from 1st October. Last week Turquoise followed its competitor, announcing that it too will introduce fees for market data, effective from 1st November. While the former’s move could have been explained by its strong market share, this is not the case for the latter. BATS Chi-X had a market... Read More

New month, new tax

Yesterday, 1st August (already!), the new French Financial Transaction Tax (FTT) came into effect. With the fine print of the new tax only emerging over the previous few days, we’ve now added the French FTT to our ‘At a glance‘ page to provide you with an overview. The tax, which applies to the purchase of over 100 French stocks with a company market value of more... 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

We learn from history that we do not learn from history

Many people might have missed it, but between 1905 and 1981 the New York state imposed a Security Transfer Tax. The tax was based on the par value (aka stated value, or face value) of stocks traded, transferred or delivered in New York State. It was not implemented as a financial stability measure, but as a revenue generator to fund the state deficit. Following the 1932 and 1966... 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

Extraterritoriality, equivalence, reciprocity? It’s all Greek to me!

Following the latest MEP discussions in Brussels can be quiet challenging at times. Not only was this particular session interrupted by protesters, but MEPs kept throwing in technical terms in regard to third country regulation that not everyone might be familiar with. So here is a quick guide to cut through all the mist. Today, the access of third country firms to the EU markets... Read More

Sacrificial lambs and unintended consequences

Andy the Trader: I heard tick size is a topic in MiFID II, again. Haven’t we been through this already? Yes, you’re right. FESE and LIBA brokered an agreement between most European equity trading venues and sell-side firms in 2009. But the topic appears again in the latest proposed amendments for MIFID II (Article 51) and on ESMA’s work program. Andy the Trader: Once again,... Read More

European Regulation – A Tale in Four Acts

According to the Chinese calendar 2012 is the Year of the Dragon. But if you ask anyone in financial markets, 2012 is the year of the regulator. The latest white paper by Fidessa aims to help market participants negotiate the increasingly complex web of regulation that will result from the introduction of initiatives such as MiFID II, MAD II and EMIR. It examines some of the unintended... Read More

Obituary: Do-good Chi-X Europe

Young start-ups with highly disruptive business models usually have the luxury of having idealistic mission statements. Just remember Apple Inc. and the promise to “think different” or Google Inc. and their slogan “Don’t be evil”. In my view, Chi-X Europe was directly in that category when, many years ago, Peter Randall was screaming from the rooftops... Read More

ESMA Guidelines – turning change into opportunity

Back in December last year you may recall that ESMA issued guidelines on systems and controls in an automated trading environment. The headlines from those guidelines caused a steady ripple of activity across the industry, in the first few months of 2012, as firms reviewed their processes and procedures to ensure compliance by the 1st May deadline or worked to have a plan in place... Read More

Much ado about nothing

ESMA is currently considering providing guidelines on fee structures. This sounds to me like the regulators are reviewing the maker-taker pricing model. MTFs introduced maker-taker pricing to Europe about four years ago, whereby liquidity providers receive a rebate for executing their passive orders, while liquidity takers will pay a fee for executing aggressive orders. Usually,... Read More

NO ENTRY into the Houses of Parliament in a suit of armour, and the MAD directives

While you may think that the title of this blog entry is obviously silly, it serves as a good example of the difference between sensible rules and bad rules. Think about it – can you work out the bad one? “NO ENTRY into the Houses of Parliament in a suit of armour” may sound ridiculous but, if you think about it, it made perfect sense when it was created at a time... Read More

Busy like a bee

ESMA just published an updated version of their work program for 2012. The regulator plans to produce no less than 77 technical standards, technical advice and guidelines and recommendations this year! The newly passed law on short selling will require 18 documents, while EMIR holds the record with 41 expected publications. Enjoy making sense of all that regulation. Luckily, in... 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

Liquidity and the regulation of markets

Last week’s TradeTech in London included a talk about liquidity by David Lawton, the FSA’s Acting Director, Markets, during which he discussed all the hot potatoes that MiFID II has to offer.  For a change, this was not another piece of 500 millisecond nonsense but included some sensible and well considered arguments. Here are the highlights of his key points: •  ... 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

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

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

Treat the cause, not the symptom

The current MiFID II draft proposes a minimum duration for any order of 500 milliseconds (see Should have gone to Specsavers!). Politicians seem to believe that installing a minimum duration for orders will halt the HFT ‘madness’ and bring some much needed calm to the market. Unfortunately, it looks like they are going to treat only the symptoms and not the cause. Trading... Read More

Self-test – am I a HFT strategy?

The European Parliament has issued its rapporteur report for MiFID II, as discussed in The Rapporteur’s Story and Should have gone to Specsavers! The current proposal includes a definition of high-frequency trading strategy. Furthermore, it proposes to regulate HFTs more strictly. That scared me a little bit. After all, I do some trading in my spare time so I followed the definition... Read More

Should have gone to Specsavers!

On first reading of the draft report from the rapporteur on MiFID II it is unclear from the wording if the ban on direct electronic access is only in the context of high-frequency trading. Surely this must be the case, otherwise we may as well all pack up now. Additional draft amendments to the MiFID text worthy of note are: •    the timeline is crystallising with the final... Read More

The Rapporteur’s Story

Here’s a taster of what could be coming in the Q1 report from the rapporteur for MiFID II – EU lawmaker wants draft securities law beefed up. Looks like, as we expected, HFT could take the hardest hit and OTFs may be limited to non-equities. Thanks to Tor for spotting this article.  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

Are we still fighting for a truly integrated Pan-European market?

The harmonisation and consolidation of European markets was truly a hugely successful project for European financial markets within the last few years. We enjoyed massive innovation, growth and new opportunities. Think about it, without MiFID, Chi-X, BATS, European Multilateral Clearing Facility (EMCF), and the Fragulator we would still have to pay ridiculous high exchange fees... 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

Make your mind up!

According to The Trade yesterday the European Parliament (EP) is considering forcing broker crossing networks to become systematic internalisers (SIs) or multilateral trading facilities (MTFs) due to fears of excessive fragmentation. The EP may limit the organised trading facility (OTF) category to non-equity instruments only. Since the October 2011 publication of the MiFID II draft... 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

Third-country confusion!

Reported last week on FT.com, a coalition of trade associations has commissioned lawyers to study the viability of a mutual recognition regime between the EU and US regulators. This is to clarify ‘third-country’ requirements in EMIR (European Market Infrastructure Regulation – reforms for OTC derivatives) and MiFID II regarding financial services businesses in... Read More

To Ping or not to Ping?

Headline items for investment firms from the ESMA Guidelines on systems and controls in an automated trading environment for trading platforms, investment firms and competent authorities are listed below: •    comply by 1st May 2012, subject to FSA adoption •    guidelines are based on existing MiFID current industry best practice with little need for any change envisaged... Read More

The long road ahead

With the arrival of the new year we have updated the MiFID II Roadmap to reflect the latest anticipated timeline for the regulatory changes. The top row of the Roadmap depicts the progress of MiFID II from Public Consultation last December, via draft legislation issued in October 2011, to likely agreement on legislation expected by late 2012. It is proposed that ESMA will develop... Read More

European financial transaction tax more likely!

A very broad agreement in favour of a European Union financial transaction tax emerged on last Monday (9th January 2012), at the start of the Economic and Monetary Affairs Committee’s work on the legislative proposal. Spokespersons for the European Parliament’s (EP) various political groups all advocated such a tax, at least throughout the Eurozone, and many were concerned... Read More

ESMA publishes its Final Report on Automated Trading guidelines – effective by 1st May 2012

22nd December 2011 – ESMA published its final report on guidelines on systems and controls in an automated trading environment for trading platforms, investment firms and competent authorities. In issuing these guidelines, ESMA rolls out a comprehensive regime governing the operation of electronic trading systems by a regulated market, a multilateral trading facility (MTF)... 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

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

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

Are you sitting comfortably?

A few interested parties settled down on Monday afternoon to watch a live broadcast on EPTV from the Committee on Economic and Monetary Affairs (ECON) – the first European Parliament open hearing on ‘MiFID Review: objectives for MiFID/MiFIR 2’. This debate is part of the open decision-making procedure around the MiFID II draft legislation, published in October,... 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

Seconds away.. round II for MiFID!

As the European Commission and European Parliament start to debate the MiFID II draft legislation published on 20th October, in the form of a Directive and a Regulation, the EP has called for (more) industry feedback. All interested stakeholders are invited to complete a questionnaire with a closing date of 13th January 2012. Speak now or forever hold your peace!  Read More

Europe’s Hotel California

With the proposed new framework of MiFID II due to increase the supervisory powers of the European regulators, it’s been particularly alarming to watch as the EU’s heads of state try to solve the eurozone’s sovereign debt crisis. Greece’s Prime Minister, George Papandreou, threw a real spanner in the works when he announced his intention to hold a referendum... 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

Toto, I have a feeling we’re not in Kansas any more!

After much speculation it seems that another North American player will now be dominating the European trading landscape. It is surprising to learn that Kansas-based BATS Global Markets will pay the equivalent of £230 million (using today’s exchange rate) for the acquisition of Chi-X Europe. The latter firm has around 50 employees so the BATS deal suggests they are willing... Read More

More psychobabble?

The power of ‘thin slicing’ is a phrase used in psychology to explain the human’s ability to make sense of situations based on the thinnest slice of experience. I don’t know if this really works but Brussels appears to be doing exactly that. In an attempt to prevent systemic risk and another Flash Crash, the latest leaked MiFID II document (dated 7th October)... Read More

How Organised is your Trading Facility?

One of the primary aims of the review of MiFID is to provide more appropriate regulatory coverage for the multitude of different trading facilities and methods of execution that have emerged over the last 4 years. Currently, under MiFID, trading venues or platforms are classed as Regulated Markets (RMs), Multilateral Trading Facilities (MTFs) or Systematic Internalisers (SIs). A... Read More

Investors warm to the dark side

Interesting article today in efinancialnews comments that in the year to August there has been a marked increase in the overall use of dark pools compared to execution on exchange for equities. The review of MiFID is mentioned and, yes, the ability of Organised Trading Facilities (OTFs) to use discretion and prevent HFT participation on their platforms may be key to execution quality.... 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

Regulation vs Directive

I read on Tabb Forum that MiFID is looking like changing from a Directive to Regulation, although I have not seen this officially stated anywhere yet. MiFID could thus become the Markets in Financial Instruments Regulation. As a piece of regulation, and not a directive, ‘MiFIR’ would be implemented centrally from Brussels rather than being allowed to be individually... Read More

Clearing the way forward

If you haven’t yet had the chance to do so, check out the July issue of FragINSIGHT. It provides a very good overview of interoperability of clearing services, whetting one’s appetite to find out why everyone is talking about interoperability in Europe. I also invite you to read Steve Grob’s blog in which he asks “Is it time for smart clearing?”. The European... Read More

Brussels falls short!

The global securities markets have experienced a couple of weeks of extreme volatility. Unfortunately, just as they did in 2008, panicked politicians have once again got involved. On August 12th a ban on short-selling was announced by the primary venues in Spain, Belgium, France and Italy with the intention of taming the markets. Short-selling occurs when traders borrow shares and... Read More

Cheaper flights?

At times I’ve got the impression that many of the European MTFs seem to compare themselves to cheap, no-frills airlines. The emergence of MTFs post-MiFID brought lower explicit costs, with incumbent providers like the LSE forced to lower their own rates to compete. In much the same way, the arrival of Ryanair and easyJet on the scene must have put pressure on British... Read More

ESMA consults on HFT

ESMA has recently published a consultation paper on its proposed guidelines for “highly automated trading” – HFT, in other words. The guidelines follow recent studies into HFT by the global regulator IOSCO (the International Organization of Securities Commissions) and the UK Treasury. ESMA’s previously stated goal for dealing with the latest ‘bogeyman’... 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... Read More

Letter from America

The Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into law by President Obama on July 21, 2010 and the US is in the midst of a rule-making process. You may have read in the press that the US Securities and Exchange Commission (SEC) is in the process of delaying the implementation of the Dodd-Frank financial changes. Last week it was also reported that... Read More

I did not order the escargot!

As the European Commission prepares draft legislation for the overhaul of MiFID after a brief public consultation period the industry waits with bated breath. However, both the MiFID review draft legislation and the Market Abuse Directive (MAD) review have been delayed more than once and seem to be proceeding at a snail’s pace. First we’re told to expect publication... Read More

Shift in MiFID II timeline

Kay Swinburne MEP delivered an excellent update on the progress of the MiFID review at a recent conference on the Challenges of MiFID II.  She revealed that the final legislative proposal – focusing on transparency, proportional oversight of the market and investor protection – would now be completed “after the summer” and by September. Publication of the... 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

The cookie monster

When assessing the impact of new EU legislation it would be fairly reasonable to assume that not all EU laws are universally welcomed by each member state and the decisions made by those in the EU can often court controversy. The most recent example being the EU’s Privacy and Communications Directive that came into force last week which requires all EU businesses running websites... Read More

Banks push FIX for fixed income trading

Regulatory changes in the form of MiFID II and Dodd-Frank are cited as drivers behind a new initiative by some of the world’s biggest sell-side banks to promote FIX connectivity for the trading of fixed income instruments, according to a recent article on Finextra.  Read More

Breaking news from TradeTech Germany – update on ECT

Kay Swinburne MEP, in her presentation at TradeTech Germany, stated that the MiFID review will legislate to provide a Consolidated Tape in line with the US model. Output and format will be mandated. As yet no decision has been made on who will operate as providers. She also mentioned that the legislators are looking to see whether a common and central audit trail can also be achieved.  Read More

… and now to the final chapters

The latest in my series of PMQs looks at further convergence of the regulatory framework and supervisory practices, covered in the final two chapters of the EC’s Public Consultation paper on the Review of MiFID. The EC is tightening up on supervision, fines and penalties and is looking to introduce a program of whistle-blowing schemes. There will be nowhere to hide and, if... Read More

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