Conclusion
With MiFID II just months away , firms are realising the need to change their business models to take advantage of the new trading opportunities . While dark pools will most probably dry up , there will be no shortage of liquidity . Indeed , the pricing power of proprietary traders will create a range of liquidity options , which will re-arm and empower institutional clients . However , thriving in a more tailored , individualised world will require managing a vast array of data , deploying well thought-out trading strategies and cultivating new industry partnerships .
As the landscape shifts , decisions on liquidity aggregation and smart order routing will grow in importance . For a firm like Instinet , it is an era of increased responsibility , a time to provide institutional clients with the benefits of independent , objective advice , backed by nearly 50 years ’ experience as the world ’ s first financial technology firm .
THE PATH TO MIFID II
Big Bang : Member State Legislation
• Multi-lateral trading between Brokers and Jobbers
• EU started process of introducing a more uniform system of regulation
1993 : Investment Services Directive
• Bi-lateral trading between Broker Dealers
• Adopted freedom of capital movement among Member States and introduced ‘ passporting ’
2007 : MiFID I
• Multilateral trading on MTFs introduced
• Competition to exchanges , end of monopolies , OTC and other venue trading allowed across EU
• Best-Ex requirements introduced
2018 : MiFID II
• Bilateral trading on SIs and RFQs
• Strict control of multilateral matching to control conflicts of interest including end of BCNs
• Full unbundling of research and vendor products
• Trade obligations tightened , forcing use of Sls for OTC trading and flow onto MTFs / RIEs
• Introduction of Dark Caps will change dark trading dynamics — move to LIS
• Enhanced Best Execution requirements protect investors and increase accountability of execution decisions for both buy and sell side . All reasonable steps becomes all sufficient steps
Benjamin Stephens benjamin . stephens @ instinet . co . uk + 44 207 154 8743
Salvador Rodriguez salvador . rodriguez @ instinet . co . uk + 44 207 154 7252
© 2017 , Instinet Incorporated and its subsidiaries . All rights reserved . INSTINET is a registered trademark in the United States and other countries throughout the world . This material is provided for informational purposes only and does not constitute an offer , solicitation , or recommendation with respect to the purchase or sale of any security , product or service . It does not take into account the particular investment objectives , financial situationor needs of individual clients . Approved for distribution in Europe by Instinet Europe Limited , which is authorised and regulated by the Financial Conduct Authority .
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Autumn 2017 www . buysideintel . com
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