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

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Memorandum MiFID II – Pre- and post-trade transparency some regulatory responsibility. Hence, from the market’s perspective, this is the preferred choice. It will give the best quality of data and the lowest price. There are concerns that it p o t e n t i a l l y c o u l d l e a d t o c o m p l a c e n c y a n d l a c k o f innovation but a frequent tender process will keep the vendors on their toes. The second choice, which is workable but, in Mr Cameron’s opinion, not as optimal is where the data standards are set by ESMA and collectors of data can compete on price, i.e. you allow pure competition in that area but y o u d o n o t g e t t h e d a t a fragmentation. Mr Cameron is, however, worried about the third choice, which is letting the market dictate a solution and if it does not work the regulators will come back and change it. This is better than nothing but unfortunately what it means is that the market will probably not come together with a solution and we then will have two wait another couple of years before we have a mandated solution. We have to start looking through an additional lens on all regulation. We have to look at various areas such as the overall health of the market, how deep is the market, how useful is the market for participants and we need to look at cost. Cost is under pressure everywhere in the entire industry because of the low growth rates. Consequently excess cost and unneeded cost has been heaped on an industry, which, at the moment, is under duress. This is necessarily not a good thing. We also need to look at the practicality of implementation. When you look at all the regulation coming from principally both sides of the Atlantic, we have an enormous amount to adhere to as an industry at the same time. A lot of those regulations are conflicting with each other despite the best efforts of everyone to try to get them to coordinate. I think the most important of all is what is the effect of these regulations in isolation and cumulatively on the
Memorandum MiFID II – Pre- and post-trade transparency real economy and the growth agenda. Every proposal that has been considered to solve the financing issues in Europe will ultimately fail if there is no growth. Regulation needs to help the growth agenda on top of the other objectives it has been set out to achieve. _____________________________ Elizabeth Callaghan Regulatory Principal Advisor – Capital Markets, KPMG Ms Callaghan focused on synergies between equities and fixed income electronic trading, w h e r e t h e y m a k e s e n s e . Electronic Trading in equities was originally the result of the need for transparency. That need has not changed, only the drivers. The drivers for transparency in the late 90s and early 2000s were a combination of buy-side desire for more informed decisions and evidence-based execution as well a s m a j o r t e c h n o l o g y advancements such as Order Management Systems and FIX Protocol. Today, the drivers are r e g u l a t o r s d e m a n d i n g transparency as a result of the market crisis and what happened with the liquidity crunch in 2008 and 2009. Ms Callaghan’s theory on transparency is that we should look at what is helpful and what is harmful and to whom. We always seem to talk about transparency as it relates to the sell-side but we need to think about the effect of transparency on the buy-side. At present, most of our pensions are controlled by pension fund managers who in turn choose large fund managers to manage their assets. An integral part of the fund managers’ performance is how well they execute in the market. As you know, the buyside uses the sell-side to execute. Understanding the effect of transparency, either positive or negative, on Fund performance is key. We know the sell-side provide the buy-side with execution services. These can include Broker
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MiFID II â Pre- and post- trade transparency - QED

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