live with that uncertainty and go
with a decision. Another impact is
that the trader needs more infor-
mation to understand if the instru-
ment being traded is subject to pre-
and post-trade transparency.”
The challenges, potential impacts
and unintended consequences
of the SI regime pose another
question for market participants.
Is there any benefit to registering
as an SI?
The buy-side is notorious for its
wait-and-see regulatory approach
and it would appear this has not
changed with regards to SIs. The
reporting and transparency requirements are a hot topic for asset
managers who historically haven’t
been burdened with the task.
“For the buy-side guys who are
hesitant on the issue, the point we
try to make, because the buy-side
does have a burden they want to
minimise, is they should consider
the regime strategically and from
the perspective of a revenue opportunity as opposed to the defensive
perspective,” says Dermot Harriss,
senior vice president at OneMar-ketData.
A political failure
Industry experts have also suggested the regime could bring about
improvements to price, meaning a
newly established dose of healthy
competition based on the allure of
quotes for different instruments.
“If the SI regime really does take
off through 2018 we could start to
see competition based on the attractiveness of the quotes. SIs offering
price improvement could potentially have an advantage over trading
venues restricted by a harmonised
minimum tick size,” says Anne
Plested, head of the EU regulation
change programme at Fidessa.
However, Mark Pumfrey, head
of EMEA at Liquidnet, says the
regime will not only cause price
improvement but also benefit the
analysis of trading venues. The
regime will produce useable data
on the depth of liquidity and price
quotes and offer an insight into
how each SI operates, ultimate-
ly helping meet compliance
for MiFID II’s best execution
“In the end it comes back to
venues analysis, SIs can quote
on what they want but it’s the
execution that matters. That’s
all we will be interested in if we
go to SI venues,” Pumfrey says.
Kay Swinburne MEP addressed delegates in a keynote
speech at the TRADE’s MiFID
II pop-up event and explained
institutions should consider
the spirit of the regulation and the
principle of the rules when exploring the specifics of SIs.
She said it’s easy to focus on the
details and forget the overarching
principle of MiFID II and best
execution is at the heart of this.
“The compromise is clear…we are
trying to persuade people to move
onto the lit space and we would
expect more transparency rather
than less. It would be deemed as a
political failure otherwise.
“MiFID II should be making
markets more transparent and
providing a better environment for
all investors,” she said.
“I would expect people to continue to
progress and use extra time to implement
more strategic solutions.”
JOE MCHALE, HEAD OF EMEA REGULATORY STRATEGY, BLOOMBERG LP
REBECCA HEALEY, HEAD OF
EMEA MARKET STRUCTURE
AND STRATEGY, LIQUIDNET