Where are we post-MiFID II implementation?
MiFID II sets out some ambitious goals in the realms of OTC trading. Namely, calling for more OTC trades to be executed on trading venues and subjecting trades to new price transparency rules.
Yet, a common observation by market participants is that MiFID has so far provided a very modest increase in trade price transparency. There are three primary drivers:
The expected results are greater transparency and ensuring that the internalisation of order flow by investment firms does not undermine price formation on trading venues.
In practice, a number of important hurdles remain. ESMA will not be providing a registry of instruments that can be traded via an SI, meaning it is up to the industry to find a solution. The next few months will be crucial to the establishment of a repository that enables the industry to identify SIs and the instruments that can be traded with them.
ICE is in discussions with a number of key players and is looking to enhance its regulatory offerings with a tool that would link financial instruments and their associated SIs.