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[ M A R K E T R E V I E W | M I F I D I I O V E R S E A S ] receive from their European asset managers and may demand the same of US firms they work with. counterparties are before assuming they are unaffected. “On the issue of unbundling, there is a lot less clarity,” says Simpson, “We’re not yet complete- ly sure how this would apply out- side of the EU. But it seems likely that if you are trading through an EU broker or buying research from an EU institution then you will have to consider whether it falls within the scope of the rules.” For firms with subsidiaries in the EU, they may also need to examine their entire research procurement process. Many asset managers have already stated their intention to ap- ply the same research and commis- sion rules being imposed in Europe across all of their operations in order to make it more efficient. For firms without a European “We’re also seeing more innovation in the block trading options available to US investors that will become necessary from 2018.” JOE DIGIAMMO, DIRECTOR, SAPIENT subsidiary, they may still find themselves needing to look at their commission payments again, as global investors may come to expect the kind of granular pricing information that they will now 62 TheTrade Summer 2017 Structural issues But perhaps the most difficult issues for US firms to handle are the subtle changes to market structure and how this will affect their ability to trade in Europe. For example, caps on dark trading activity are expected to result in a move towards larger trades in Europe and the caps could mean US investors are taken by surprise when they cannot trade a particular name in the dark due to the cap. Sapient’s Digiammo says: “We’re starting to see some people come across this issue in the US and we’re also seeing more innovation in the block trading options available to US investors that will become necessary from 2018.” Regulatory reporting issues are also likely to trip up those investors outside of Europe trading in the juris- diction, Digiammo adds. “I think one of the biggest issues investors here will face is the dual reporting standards for OTC deriva- tives.” Simpson agrees and says transparency in pre- and post-trade will be a big focus when MiFID II is imple- mented. “There is going to be a huge amount of additional trading data available. Europe is creating very trans- parent markets with MiFID II. This could even make EU markets more attractive for US investors in the long-run,” Simpson explains. End the apathy The list of potential issues for non-EU investors goes on, there are hundreds of pages of regulation sur- rounding MiFID II, along with various consultation papers, public statements and individual member state interpretations. It can seem alarmingly complex to the point of mak- ing traders outside the EU want to bury their heads in the sand, but this could be a mistake. “There has been a real slowness to take up to this