Pieces Coming Together
By Christian Voigt, Senior Regulatory Adviser, Fidessa
Derivatives market participants have been rightfully concerned about the potentially adverse impact of MiFID II on global trading. However, the US and EU authorities have taken significant steps in recent weeks to mitigate some of those concerns. The CFTC has issued an interpretative letter regarding the unbundling of research, something that is mandatory in the EU under MiFID II but partly restricted in the US. The SEC did the same a few weeks ago. Also, the CFTC and the European Commission (+Annex) recognised a number of SEFs, MTFs and OTFs as being equivalent, essentially allowing cross-border trading via those platforms to continue.
With the global compliance jigsaw slowly coming together, finally a picture of the post-MiFID II market structure emerges. The one piece that is still missing is a list of all the new OTFs, SIs and MTFs. ESMA have already said that they will publish one on the 3rd January, but if you look at the Appendix to the CFTC MTF/OTF recognition you will find a little sneak preview.
A systematic internaliser can report trades on behalf of clients.
EU trading venues can temporarily opt-out from ETD access provisions.
Certain derivatives need to traded on a venue under new regulations.
There are tax implications for banks that become Qualified Derivatives Dealers.
Early observations include 'teething problems' with data.