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MiFID II Preparation Challenges Emerge

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For trading operations, MiFID II still appears to be a moving target in terms of transparency and reporting requirements, according to data and regulation experts from industry service providers.

Compliance with MiFID II is requiring significant technology resources, the experts said, speaking during the general meeting of FISD in New York on December 15.

“In 2017, banks, asset managers and the vendors that support them across the industry are faced with the technical and logistical challenge of on-boarding more than 80 or 90 venues, and 30 to 40 new APAs [approved publication agreements], let alone new market entrants and FinTech providers,” said John Mason, head of regulatory and market structure response and propositions at Thomson Reuters. “The market also has to address the micro and macro structural and data challenges that exist with current venues, their current levels of inter-connectivity and the future difficulties that may result from the on-streaming of non-equity venues for the first time.”

Thomson Reuters and its partners are working with several trading venues, such as Bats Trading, to be prepared to set specifications once the European Securities and Markets Authority (ESMA) outlines in greater detail their recommendations, according to Mason. “We also must consider the differing reporting obligations facing systematic internalisers (SIs),” Mason said.

Innovation has a place in MiFID II compliance, however, according to Julie Hutchinson, head of solutions, North America at Colt Capital Markets, a global network and trading infrastructure provider. “There are a lot of interesting fintech companies building technology to meet these compliance requirements and trade transparency requirements,” she said. Colt operates the Colt PrizmNet extranet, which includes an algorithm testing service offered by TraderServe. “[TraderServe] is making sure we don’t have ‘algos gone wild,’ disrupting the market, so we ensure market stability.”

Dash Financial, a best execution and trade transparency software provider, is in the process of joining PrizmNet, and is another example of an innovation that Hutchinson cited. “Dash Financial’s software helps with best execution across multiple venues with varying order sizes, calculating broker-specific rebates and discounts, to get a true view of execution quality,” Hutchinson added. “The software then provides the information back to end customers to justify the trades they made in different markets.”

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