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operational challenges firms will
encounter and there will always be
the question for ESMA of how it
will police this,” he added.
“The trader needs more information to
understand if the instrument being traded is
subject to pre- and post-trade transparency.”
GEOFFROY VANDER LINDEN,
HEAD OF TRANSPARENCY SOLUTIONS AT TRAX
“We will have
exacerbated the
fragmentation.”
JP URRUTIA, EUROPEAN
GENERAL COUNSEL, ITG
52
TheTrade
Spring 2017
Lingering questions
JP Urrutia, European general
counsel for ITG, explains how
many envisage a re-concentration
of liquidity once the regime is in
place, but the implications could
include further fragmentation in
markets.
“I think the outcome is going to
be far from being a re-concentra-
tion of liquidity. We will have exac-
erbated the fragmentation because
now, instead of having a few MTFs
and a spattering of broker-crossing
networks, the majority of which
are large bulge brackets, there
is likely to be new entrants that
become SIs,” he says.
Rebecca Healey, Liquidnet’s
head of EMEA market structure
and strategy, told delegates at The
TRADE’S event the challenge is
taking the current model of bro-
ker-crossing networks and moving
it to a new environment.
“SIs have to be a bilateral busi-
ness, but it’s a two-way trade. So
how do we move from one model
to another when the whole net-
work is interlinked?”
ESMA sought to answer the many
lingering questions via a Q&A in
November last year, but instead
seemed to create ‘new unknowns’
for the industry. The European
regulator stated buy-side firms
should carry out SI assessments by
1 September 2018, ultimately delay-
ing implementation of the regime.
The Q&A response explained a lack
of data would mean the regime
could not be fully applicable until
there is at least six months of data
available.
“ESMA will publish the neces-
sary data (EU wide data) for the
first time by 1 August 2018 covering
a period from 3 January 2018 to 30
June 2018,” the response said.
The potential for some firms to
opt into the regime in January
2018, as others choose not to could
see an industry split over becoming
an SI, causing further unintended
consequences.
Prior to the publication of the
Q&A, different market participants
were trying to figure out how to
understand if they met the thresh-
old or not. Many firms are still
scratching their heads. Those on
the borderline of the threshold are
trying to weigh up the cost benefits
of becoming an SI.
McHale said that sitting back and
not advancing regulatory pro-
grammes, despite the delay to the
regime, would not benefit anyone.
Dangerous approach
“I would expect people to continue
to progress and use extra time to
implement more strategic solu-
tions. Maybe when rules are more
holistic, interactions with share
trading or best execution, that’s the
key as people tend to focus on one
part,” he said.
However, Geoffroy Vander Lin-
den, head of transparency solutions
at Trax, countered by saying the
data is crucial for the assessments.
“We need the data to assist the
regime…but expect side effects for
the buy-side,” he said. “You have to
live with that uncertainty and go