Best ex transparency moves to the next level

  • Christian Voigt, Senior Regulatory Adviser at Fidessa

  • 12.08.2015 01:00 am
  • #MiFID II , Christian is a Senior Regulatory Adviser at Fidessa. He focuses on the growing regulatory and functional requirements for multi-asset automated trading systems, supporting Fidessa's clients across Europe in meeting these challenges. Christian was previously a Vice President at Deutsche Börse AG, responsible for business development in the institutional equity markets. He began his career as a scholar at the European Business School in Germany, where he obtained his doctorate and published several papers on empirical issues in Market Microstructure.

The draft technical standards for MiFID II require exchanges to publish quarterly execution quality reports (RTS 6). Sell-side firms are expected to digest these and update their best execution policies accordingly. Additionally, sell-sides must publish their own execution quality reports annually (RTS 7), which obviously should be digested by the buy-side. While sceptics might argue that the biggest impact will be an increased demand for paper, outright opponents point to some details which could drive significant changes in market structure.

Firstly, the exchange report under RTS 6 is extensive, covering all trading activity that an execution venue undertakes in a specific instrument. Interestingly, all execution venues – not just trading venues – must publish the report, putting market makers for instruments without a trading obligation (such as ETFs) in scope too. Secondly, RTS 7 requires investment firms to quantify for their top five execution venues the client order volume, the execution costs, the rebates, and more. All that together could represent a valuable set of data, freely available to the wider market. While it is accepted practice in the Nordic markets to publish the market shares of all exchange members, MiFID II will potentially take this a lot further.

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