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“Liquidity ultimately depends on
your treatment of the market – treat
it fairly and you will have liquidity.”
The month after he joined, BNP
Paribas partnered with market
maker GTS in an effort to provide
clients with improved pricing in
US Treasuries using GTS trading
tools. The accord was part of a
trend for banks that used to rely
on in-house systems to partner
with technology specialists in
fixed income trading, as the costs
of reshaping legacy architecture
for increasingly electronic markets
became prohibitive.
22 // TheTrade // Autumn 2018
The introduction of MiFID II in
January this year is reflective of
this process, as well as acting as an
accelerant. The chief objective of
the regulation is to increase trans-
parency within the markets, create
more structured marketplaces,
lower the cost of market data,
improve execution and ensure
that trading costs are provided in a
more explicit manner.
One of the biggest impacts of
MiFID II has been the separation
of research costs from execution
fees. Previously, bank strategists
and economists were able to freely
interact with clients without any
recognition of cost but now, under
the new regulations, research can
no longer be offered for free as part
of a package of services. Even free
trial periods for research have been
ruled out.
This means that execution must
stand or fall alone, creating pres-
sure for continuous improvement,