Mifid II increases off-exchange trading
(18 June 2018 – Europe) Robert Ophèle, the head of one of Europe’s biggest market regulators has warned that the “jury is still out” on new Mifid II transparency rules amid thriving off-exchange trading in France.
The Mifid II rules were designed to make European markets safe, more efficient and transparent, and discourage trading away from stock exchanges. Banks were banned from trading customers’ orders via their own internal trading desk.
However Mr Ophèle, chairman of the Autorité des Marchés Financiers, said he had been “surprised” by a spike in trading in private, off-exchange marketplaces since the launch of Mifid II in January.
Mr Ophèle raised concerns about the growing use of so-called “systematic internalisers” which allows institutions to trade shares away from the market if they transact customers’ deals in their own accounts. The legal status was little used before the launch of Mifid II.
Systematic internalisers are more lightly regulated, and standards around smaller trading increments – or tick size – and trade reporting are eased.
European regulators have been worried that exchanges and other trading venues will be disadvantaged because they cannot quote in the same tick sizes as systematic internalisers.