For one of Europe’s most senior markets regulators, the arrival of MiFID II after seven long years has been a real tonic. It was “a smoother than expected transition to the new regime,” Verena Ross, executive director at the European Securities and Markets Authority told a conference in Sweden last week. The “unprecedented” amount of new data collected meant that the regulator could conduct its first, deep analyses on the region’s fund industry and its derivatives markets. “A decade ago, before the crisis, [it] was simply not available,” she said. That optimism is not widely shared. For the banks, exchanges and fund managers in the front line of Europe’s flagship markets legislation, the costly project has had little upside so far. The rules were conceived after the financial crisis but debates and delays meant they did not become a reality until 2018.
At the core of MiFID is a push for more transparency across most of Europe’s actively-traded asset classes, like equities, fixed income, futures and swaps; the cash foreign exchange market was the main exception. But 17 months on, the biggest complaint is that trading is less, not more transparent. Even Ms Ross admitted: “It is only gradually that we can judge MiFID II’s impact on the markets.” Market participants are beginning to pass their own judgment. For equities, Mifid sought to cap the amount of trading in “dark pools”, which are marketplaces where shares can be traded away from exchanges or alternative trading venues.
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