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21 October 2011

FN: MiFID II - in a nutshell


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After two years of information gathering, frenzied lobbying, several leaks, and hundreds if not thousands of column inches, the European Commission has finally published its legislative proposal for MiFID II. But don't get too excited - it is hardly inscribed in stone.


MiFID II is the key piece of regulation that is set to transform the way a range of instruments are traded in Europe. It aims to update and build on the reforms introduced by the 2007 Directive. According to market participants, the European Commission went to ground earlier this year and became unresponsive to industry feedback as it put pen to paper. This suggests that there are a plethora of firms lining up to get appointments with the most important Members of the European Parliament in order to push for changes to today's text as it moves to the next phase.

Transparency is key

Transparency is the central theme of the MiFID rules and the European Commission is determined to ensure that the main rules around transparency in equities are extended to other products too, including bonds, commodities, derivatives and structured finance.

Clearing competition

The Commission plans to overhaul the European clearing market by forcing exchanges to allow clearing houses to access their clearing flows. The rules will finally put an end to 'vertical silos' whereby exchanges restrict access to their downstream clearing houses, thereby enabling them to dominate both the trading and clearing of instruments on their platform.

More competition in derivatives trading

The new clearing rules will help aid competition in the derivatives industry by allowing upstart derivatives trading platforms access to existing derivatives clearing pools that are vertically integrated. This will be welcomed by the majority of industry participants who have long complained that derivatives trading in European is anticompetitive.

Tougher rules for over-the-counter trading

The European Commission has pushed ahead with a more stringent version of its controversial proposal to create an additional trading category, an 'organised trading facility', in a bid to force OTC trading into the light.

Automated trading assault

European efforts to regulate high speed trading will be covered by the MiFID regulation.

Full article (FN subscription required)



© Financial News


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