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The leading knowledge platform for the financial technology industry

A-Team Insight Blogs

Talking Intelligent Trading with Andrew Delaney: It’s MiFID II Time!

Hot on the heels of our highly successful Trade Europe Now! white paper (sponsored by Interxion and available for free download here), yesterday we released our latest missive on MiFID II. Titled ‘MiFID II: Practical Considerations for Gainful Compliance’, the paper is sponsored by ORC Group, and like it says on the tin it offers trading firms guidance for making the most of the changes the new regulation will bring.

In case you didn’t notice, ESMA published its final comments on the MiFID II rules due to come into effect in January 2017. As David Farmery of Message Automation said on a panel I was speaking on last night in London: “That’s 64 weekends away.” Which isn’t a whole lot of time, given the breadth and depth of the MiFID II’s requirements.

Certainly, we expect MiFID II to keep us occupied here at Intelligent Trading Technology for much of 2016. As you’ll see from the paper, MiFID II is quite prescriptive in certain key areas that could have a significant impact of firms’ decisions to continue business operations in those areas.

For us, MiFID II’s key points act as a kind of leading indicator of where market interest will lie in 2016. As such, we’ll be touching on many of the topics at our Intelligent Trading Summit in London on February 4. An early agenda is available here, there’s a lot of scope for new ideas so if you’d like to get involved please get in touch.

As some of you know, we have already started speaker and panellist recruitment and hope to have a fairly full agenda in place by mid- to late-November. We’re proud to name Fidessa as platinum sponsor both for the London event and its sister event in New York on May 24.

Getting back to MiFID II and our latest paper, we discuss the regulation’s requirements, and offer suggestions on how to meet them, for a number of areas, including:

  • Systematic Internalisers (SI)
  • Enhanced Transparency
  • Best Execution
  • Clock synchronisation
  • Pre-trade risk
  • Instrument definition management
  • Trading algorithm testing

These elements will all undergo significant change under MiFID II – we talked about algo testing in an earlier paper from TraderServe – all against the backdrop of greater transparency across all asset classes and a much more strenuous interpretation of the concept of best execution.

In many cases, MiFID II will be more granular, prescriptive and onerous than MiFID I, raising business and technology challenges for affected parties that will need to be resolved under a tight deadline (64 weekends!).

It does seem that the marketplace has been sitting on the fence. At last night’s MA function, panellists and audience members alike fretted about the amount of work that needs to get done before the end of next year (and actually a lot before that if we are to do the proper testing).

This was borne out by the survey we conducted for the MiFID II white paper. For the survey, we talked to a group of electronic trading executives from Tier 1, Tier 2 and Tier 3 sell-side financial institutions across Europe. Ahead of the publication in September of the final ESMA guidance, many respondents were still taking a wait-and-see approach.

It’s now time for the marketplace to roll up its collective sleeves.

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