Industry experts agreed the reporting requirements under MiFID II have brought about ‘ unintended consequences ’, and firms will not perfect reporting by the 2018 deadline .
Global concerns about liquidity in the bond market have been well documented in the financial media in recent years , but fixed income has been further impacted by the prospect of harsher regulation to enhance transparency , according to delegates .
Bowie argued : “ Transparency without liquidity is a bad thing – four investment banks learnt what I wanted to do , without giving me any liquidity .”
Bond trading has seen multiple industry initiatives recently to accommodate investors seeking new approaches , with many focused on trading the securities electronically in a similar way to equities .
Union Investment ’ s Hock concluded : “ Electronification is the result of new regulation and we will see fragmentation in fixed income markets , it ’ s a matter of fact that this will happen .” Bloomberg did not respond to a request for comment . l
Industry experts have agreed the likelihood of firms perfectly reporting as required under MiFID II is highly unlikely by 2018 .
Delegates at The Trade ’ s MiFID II event in Frankfurt on 10 May discussed the issue and agreed reporting requirements have brought about ‘ unintended consequences ’.
Heinz Martin Sorge , product development at Deutsche Boerse ’ s regulatory reporting hub , told the panel : “ MiFID II was delayed due to the trouble ESMA has in setting up a database for reference reporting . The entire market has to report data .”
Sorge added despite the systematic improvement MiFID II will bring to the market , unintended consequences have arisen which regulators are not on top of .
He said : “ It ’ s not so improbable more problems will arise and there will be years of data being created but not analysed or used . There will not be perfect reporting under MiFID by 2018 .“
Mark Kelly , director at Abide Financial , said some firms are unaware of what exactly they need to report , with many requirements not effecting them .
Kelly added that exchanges have the most difficult task in reporting of all market participants : “ Exchanges have the most difficult task of everyone in the market .
“ They have to report from their perspective , go to market participants around the world and obtain sensitive data on their traders . It ’ s a recipe for driving business away .”
Deutsche Boerse ’ s Sorge explained the challenges lie in the ‘ completeness ’ and ‘ comprehensiveness ’ of the data being reported .
He said : “ Transaction reporting provision of reference data is a problem , and the other side is dealing with sensitive customer data . We need to think of new models for transaction reporting .” l
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