can be a significant cost for any business and if it becomes uneconomical for them then it will have an impact .
“ There are definitely fears in the market that this will impact on liquidity , though I think this is more a general theme for all those affected by MiFID II , as opposed to just among the HFTs .”
BEYOND MIFID II Some think that MiFID II is not placing any significantly onerous restrictions on HFTs , merely putting them on a level footing with other regulated firms that face considerable record keeping requirements under the regulation .
Nick Idelson , technical director at algo testing specialist Traderserve , said the regulation that is really going to impact HFT firms in the Market Abuse Regulation ( MAR ), which is due to be introduced in July , just after this guide was published .
“ People have been so heavily focused on MiFID , they have not considered the effect MAR will
PEOPLE HAVE BEEN SO HEAVILY FOCUSED ON MiFID , THEY HAVE NOT CONSIDERED THE EFFECT MAR WILL HAVE , WHICH FOR SOME HFTS COULD BE FAR GREATER .
NICK IDELSON , TECHNICAL DIRECTOR , TRADERSERVE
have , which for some HFTs could be far greater ,” explains Idelson .
“ People forget that MAR is not just about insider trading but also the requirement to ensure nothing you do can contribute to a ‘ disorderly market ’.”
This latter point in particular is likely to affect HFT far more than anything in MiFID . No only are some HFT strategies , such as quote stuffing , explicitly banned , but HFTs will need to be extremely careful they don ’ t push algos into the market that could destabilise it .
Falling foul of the rules is set to be costly , with fines equivalent to 15 % of turnover , individual fines and , in extreme cases , custodial sentences could be levied .
Whether HFT rules in either MiFID II or MAR have a marked effect on liquidity remains to be seen and may even be difficult to judge given the broad expectation that liquidity will reduce under the new regimes .
However , Voigt believes there is a silver lining .
“ Yes we could see a loss of liquidity in markets from 2018 but if this comes as part of making markets more stable and less prone to crashes , which can be devastating for many market participants , then that is ultimately a good thing . In the long run , more stable markets could help attract new liquidity from other sources ,” he says . l
46 | THE TRADE MiFID II HANDBOOK www . thetradenews . com