Articles tagged by Mifid Ii
Continued market uncertainty following the UK’s
vote to leave the European Union vote has led to a flight to safe haven
currencies and raised questions about the future of financial regulation,
although corporates appear to be coping well with ...
Financial regulations, particularly for
benchmarks, are likely to be materially aligned in the UK and rest of Europe by
the time Brexit is completed, however obtaining “equivalence” status for the UK
might not be quite as straightforward, a number of ...
The European Securities and Markets Authority (ESMA) has published a Q&A document seeking to clarify expected standards around certain practices, including best execution.
The questions have been set following feedback and enquiries from the general public, other regulators and market participants.
On best execution ESMA publishes two Q&As, the first explains the different between the “reasonable steps” firms were expected to take to obtain the best possible execution under MiFID I and the “sufficient steps” they are required to take under MiFID II.
There’s a wave of change sweeping across non-equity markets driven by regulatory initiatives and the rise of non-bank liquidity providers. Other factors driving buy-side adoption of Transaction Cost Analysis (TCA) in FX are the need to generate alpha on investment returns, and regulatory scrutiny
of trading practices in over-the-counter (OTC) instruments.
TCA is a broad term which doesn’t describe the actual analysis to be carried out. Asset managers who rely on custodian banks to execute currency trades have a compliance obligation to analyze these FX trading costs.
By monitoring fill rates, TCA tools can help traders determine if ‘last look’ is occurring, and then decide whether or not to shift their trades to other venues.
As 2016 comes to a close the regulatory agenda shows no signs of slowing. While the FX market itself has largely not been directly addressed by new regulations, it has been swept up in many of the broader OTC market reforms.
March 1 will mark the implementation of the variation margin requirements for non-cleared derivatives, meaning that thousands of counterparties – including asset managers, pension funds, insurance companies and hedge funds – will need to change their existing collateral support agreements, or set up new ones, before this date.
FX market participants face numerous challenges next year in adhering to regulatory deadlines, according to experts on a recent Profit & Loss webinar.
One of the more immediate regulatory deadlines that firms are currently preparing for is on March 1, 2017, when the new variation margin requirements for non-cleared derivatives come into force.
But as Gabriel Rosenberg, a partner at Davis Polk pointed out, there are a number of factors within these requirements that are making them difficult for firms to comply with, even in instances where they are already exchanging variation margin with their counterparties.
XTX Markets has made XTX-ray, a tool designed to replicate how sell-side market makers analyse spot FX liquidity, available to buy side market participants.
XTX-ray looks at a wide range of data, including fill ratios, the cost of rejected trades in USD, spreads and market impact, to reveal “hidden” costs embedded in firms’ spot FX execution with the aim of enabling them to more effectively analyse the liquidity they are accessing.
“XTX-ray makes state-of-the-art sell side execution analysis available to buy side firms, and counterparties will be able to evaluate the execution quality of their liquidity providers.
Thomson Reuters has made key enhancements to its data analytics platform, Velocity Analytics, to provide high-speed processing of real-time, streaming and historical data that the firm says will help EU and non-EU financial markets participants meet their MiFID II obligations.
The enhanced platform, which is now powered by Kx’s technology, enables a range of use cases such as best execution compliance, transaction cost analysis, quantitative and systematic trading. It will also support new multi-asset best execution and Systematic Internaliser determination capabilities from Thomson Reuters in 2018.
Thomson Reuters is creating a suite of reporting services that will support the workflow of market participants in their efforts to meet post-trade transparency requirements mandated by the Markets in Financial Instruments Directive II.
In preparation for the new regulations, the company says it is working closely with over 50 European exchanges and more than 30 additional venues to onboard new MiFID II content to its Elektron Data Platform. It is also providing test data to market participants so that they can prepare their systems for new parameters, such as high-precision time-stamps, in advance of MiFID II deadlines.
GreenKey Technologies says the US Patent and Trademark Office has accepted its application for human speech-to-text and subsequent interpretation of spoken financial trades in a fast and accurate manner.
NEX Regulatory Reporting and Duco, a provider of self-service data normalisation and reconciliation services, have announced that Nex Regulatory Reporting is to use Duco’s technology to provide MiFID II reconciliation to its clients.
Reconciliation is a mandatory activity under MiFID II. The joint offering will use Duco’s reconciliation platform, Duco Cube, as a “black box” through its API. As a result, Nex Regulatory Reporting clients will receive a seamless reporting, validation and reconciliation experience for MiFID II through the new integrated user interface.
State Street says it has received approval from the UK’s Financial Conduct Authority (FCA) to operate its FX Connect and Currenex platforms as multi-lateral trading facilities (MTFs) for foreign exchange within the jurisdiction of MiFID II.
Both platforms will now operate as MTFs and be upgraded to be compliant with MIFID II upon implementation in January 2018, State Street says.
For institutions that fall under the MiFID II regime in Europe, “financial instruments” can only be traded on the new MTFs.
Cürex Group is introducing microsecond timestamp confirmations for its clients’ trading activity.
In a release issued today, the firm says that the rollout underscores the firm’s mission to support the best execution standards required under Mifid II, which will take effect in January 2018.
In addition to these timestamp confirmations, the post-trade analytics allow its customers to “walk the book” backward and forward by the microsecond to study the market before execution and after to try and gain deeper insight into their trading impact.
new rules, according to a survey by the Alternative Investment Management Association (AIMA).
Fund managers globally that responded to the survey said that their biggest challenge regarding Mifid II is uncertainty about what the rules contained within the regulation actually mean – both their scope and substance – as well as what they perceived to be a lack of clarity relating to the cost and nature of services provided by brokers.
The survey showed that 34% of alternative asset managers are undecided about how they will pay for research following the implementation of Mifid II. Of those that have made decisions around how to pay for research, 80% plan to charge investors and the remaining 20% intend to absorb the costs themselves.
Redline Trading Solutions has updated its InRush feed handlers for European trading venues in response to the Mifid II compliance in January 2018.
“Next generation exchange platforms, originally designed to improve throughput and latency, are now also serving as the mechanism for meeting the looming mandates of MiFID II regulations,” says Matt Sexton, CTO of Redline. “Redline is supporting our customers with the rollout of new feed handlers for virtually every exchange in Europe this year, as well as providing the tools and infrastructure needed to help meet Mifid II testing requirements,” he adds.
In a release issued today announcing the update, Redline highlighted the number of major European exchanges that are moving to new or updated protocols ahead of the Mifid II compliance deadline.
The Foreign Exchange Professionals Association (FXPA) will be promoting the FX Global Code of Conduct given that it addresses so many issues that the association has already been working on, according to its chairman.
“There’s a preamble in the Code that it wants to promote a robust, fair, liquid, open, transparent market and those are the exact same adjectives that we use in the FXPA [mission statement], and so we look at this as being very complementary to our mission and we’re certainly going to be promoting the Code,” says Chip Lowry, senior managing director at State Street Global Markets and chairman of the FXPA.
A new study by consultancy firm JWG shows that 90% of buy side firms believe they are at either high or medium risk of not being compliant with the Mifid II rules when they come into effect in January 2018.
Among respondents to the survey, about one-third had less than £1 billion of assets under management (AUM), one-third had between £5 billion and £50 billion AUM and the remaining one-third had between £50 billion and £500 billion AUM. However, the level of preparedness was not found to be dependent on the size of the firm.
A number of factors, including the increased need for an audit trail for FX execution and a desire to limit market impact, are driving the adoption of algorithmic execution tools amongst buy side firms, says Petra Wikström, global head of execution and alpha solutions at BNP Paribas.
Although Wikström says that the continuing automation and electronification of the FX market naturally leads to more firms broadly using algos as one of their execution tools, there are other specific factors driving the adoption of algo tools by the buy side.
Just eight months after releasing its first post-trade execution analysis product, BestX has rolled out its much-anticipated pre-trade execution analysis functionality.
The release helps the firm, which was co-founded by former Morgan Stanley staffers Pete Eggleston, Oliver Jerome and Aman Thind in early 2016, deliver on its vision of an end-to-end best execution service, as Eggleston explains. “We look at best execution as a lifecycle event where you can look at a trade or portfolio of trades throughout the cycle."
GreenKey Technologies has announced a global partnership with Red Box Recorders, a provider of voice recording technology and services, to create an integrated solution for embedded compliance recording within GreenKey’s software-based trader collaboration offering.
Red Box technology records voice conversations over soft client phones, turrets and mobile devices and the firms say that clients can use it with the trade and communications analytics, monitoring and archiving capabilities of GreenKey’s Enterprise Voice Collaboration platform to provide complete records of trade activities.
Terence Chabe, business development manager, Colt PrizmNet, and John Sullivan, head of Capital Markets USA, at Colt Technology Services talk to Profit & Loss about the challenges posed by Mifid II compliance.
Profit & Loss: Are you currently seeing a disparity between different market participants in terms of how ready they are for Mifid II?
Terence Chabe: The sell-side seems to be more ready for Mifid II, as they’ve made an investment to ensure compliance. It’s really on the buy-side where we see less preparation, and they might not necessarily have the same infrastructure or funds available to make sure that they’re compliant with some of the technical requirements of Mifid II.
The Alternative Investment Management Association (AIMA) has published a guide for alternative investment managers to help them understand and implement the enhanced best execution obligations under the European Union’s updated Markets in Financial Instruments Directive (MiFID2), which will apply from January 2018. AIMA’s MiFID2 Best Execution Guide, which is only available to AIMA members, outlines the MiFID2 obligation to achieve the best possible results when executing transactions. These rules were originally introduced under MiFID1 and have now been enhanced in a number of areas.
Thomson Reuters (TR) has updated its FXall and FX Trading desktops to ensure clients trading its Multilateral Trading Facility (MTF) will remain fully compliant with the upcoming MiFID II requirements.
The enhancements will enable TR to add MTF-support for FX forwards, swaps, NDFs and options trading on FXall, as well as continue support for swaps trading on Matching. The company says this enables users to remain complaint with the new MiFID II execution requirements for FX derivatives that will take effect in January 2018.
TR has now begun the transition process for customers to its enhanced MTF and is releasing new interfaces to both FXall and FX Trading that accommodate new data fields, as well as improve post-trade STP feeds to assist customers with reporting and record-keeping requirements.
The Regulatory Reporting Hub of Deutsche Börse Group has launched a partnership with Risk Focus and its software subsidiary, RegTek.Solutions, to help with its OTC trade reporting.
Risk Focus will provide key system components for OTC trade reporting solution, including interpretation of instrument details of OTC derivatives submitted in FpML or XML format, as well as a rules engine for applying the regulatory validations, eligibility checks and deferrals.
“In the dynamic environment with frequent updates of regulatory details, the approach using a rules engine has already proven to be very useful. OTC trade reporting is one of the backbones of Mifid II, which is going to be effective as of January 2018.
NEX Optimisation has enhanced its existing messaging services to help clients prepare for the introduction of MiFID II on 3 January 2018.
The firm says it has extended Traiana’s Harmony messaging network to enable participants to exchange additional information to assist with meeting a number of regulatory obligations under MiFID II.
This includes support for data elements associated with transparency, transaction reporting, venue execution, instrument and entity identifiers, timestamps, OTC post-trade indicators and unbundling of research as well as execution fees.