foreign.exchange /fɒrɪn ɛksˈtʃeɪndʒ/
The big picture
While not subject to a specific regulation in itself, foreign
exchange trading will be impacted by best execution, reporting
and pre- and post-trade transparency requirements.
The new classification of trading venues under MiFID II,
including systematic internalisers (SIs) that deal on their own
account when executing client orders, multilateral trading facilities and organised trading facilities will also impact FX.
Orders executed on these trading venues should be reported
by the venue itself, while orders executed bilaterally with SIs
should be reported by the SI operator.
The biggest change?
Best execution will mean that transaction cost analysis (TCA)
will be increasingly adopted in the FX world. Previously
consigned largely to the equity market it has been less quickly
adopted in FX, largely due to the absence of consolidated, reliable benchmark data. But Under MiFID II, firms are required to
take into account price, costs, speed, likelihood of execution and
settlement, size, nature or any other consideration relevant to
the execution of the order.
The biggest struggle
Understanding reporting requirements and getting systems in
place could be the biggest struggle outside of best execution.
The transparency rules are wide-ranging and complex, and it
is incumbent upon firms to determine which trades must be
reported and which party must fulfil the reporting obligation.