MiFID II – Pre- and post- trade transparency - QED

Memorandum
MiFID II – Pre- and post-trade transparency
There is a huge amount of pret
r a d e d a t a o u t t h e re . A n
institutional fund manager of
medium size will receive between
2 0 . 0 0 0 a n d 4 0 . 0 0 0 p r i c e
messages per day. There is an
asymmetry in that the sell-side
has no view of this; they push the
data into their machines and the
buy-side sees all the information.
Who really sees those messages
is something that is being
discussed but at the time being
this is not regulated.
Post-trade is more difficult and
the arguments go both ways. The
positive arguments are that it
gives transparency, it gives
confidence, it’s fair and it brings
more people into the market.
Those are very valid arguments.
The counter argument is that in
very illiquid markets price
information can mean that the
buy-side investor cannot get his
trade done in a sensible format or
even at all. In the bond market,
liquidity means that either you get
a price or you do not get a price.
This situation is getting a lot
worse and it is even hitting the
government bond markets. So it
is not that we do not need extra
liquidity - we need every single bit
of liquidity we can have in the
credit markets because they need
to grow to do the financing which
is taken out of the loan markets.
Calibration is absolutely key in all
this. We need to walk into this in
steps so that we do not do the
same mistakes as we did with
MiFID I. We should put some in
and then have a look, examine it,
and then put some more in.
ESMA is going to have a crucial
role in determining this calibration.
Consolidated data is not an area
in which to experiment. You can
have a mandated vendor-provided
tape where basically all the data
goes into that player and all the
data comes out of that player.
That keeps the cost to the
absolute minimum for the overall
industry. This solution will have
one data standard, minimal
leakage and they can even have