Market Structure and trading venues under MiFID II

With less than 30 days until the new regulation comes into effect, many firms operating Trading Venues (MTFs and OTFs) are becoming conscious about meeting their transparency obligations in time.

In this article Per Lovén, Commercial Director at Simplitium, outlines the impact of MiFID II transparency on Trading Venues, and explains how Simplitium’s FacilitEx service allows OTFs and MTFs to meet their transparency obligations.

MiFID II brings significant change to the trade transparency space. How will this affect Trading Venues?

One of the aims of MiFID II is to make trading in general more transparent and to move OTC trading onto more regulated frameworks or Trading Venues. To achieve this, MiFID II requires Trading Venues that are not Regulated Markets (exchanges) to be authorised either as Multilateral Trading Facilities (MTFs) or Organised Trading Facilities (OTFs). Each of these classifications imposes specific rules on Trading Venues in regards to their transparency obligations.

What transparency obligations are Trading Venues subject to?

Under MiFID II, Trading Venues must comply with a range of pre and post-trade transparency obligations. These requirements vary depending on the type of trading system they operate and are detailed in Annex I: RTS 1 for Equity and RTS 2 for Non-Equity instruments. In terms of pre-trade, Trading Venues will be required to make public current pre-trade information on a continuous basis. This includes bid, offer prices (and actionable indications of interest) and the depth of trading interest at those prices depending on the trading protocol they support. In terms of post trade, Trading Venues will be subject to the post-trade reporting obligation which requires firms to report executed trades as close to real time as technically possible (within at least one minute for equities and fifteen minutes for non-equities).

What impact will this have on firms operating Trading Venues?

The increased obligations for firms operating Trading Venues will require significant resources post January 3rd 2018. Developing a solution in house that will meet the regulatory requirements and adapt as the regulation and market structure evolves will therefore be a significant challenge for firms.

Would you say that the market participants are prepared for MiFID II?

While Trading Venues are becoming increasingly aware of their transparency obligations, many have yet to finalize the arrangements of how they will comply come January 3rd.

What can OTFs and MTFs do to meet their transparency obligations?

With the increasing transparency obligations under MiFID II it is important that firms operating Trading Venues have a solution that they are confident will ensure they meet their pre and post-trade obligations accurately and on time.

FacilitEx delivers a unique and comprehensive transparency market solution specifically designed to help OTFs and MTFs meet their transparency obligations. Through a highly optimised and customisable infrastructure, the service caters for the needs of complex and high transaction volume marketplaces. FacilitEx is designed to meet the demands of today’s market structures while being future-proofed for the fast-moving global regulatory landscape.

As the regulators have provided more clarity around the obligations on OTFs and MTFs, we have seen the demand for a comprehensive and flexible transparency solution increase. We are dedicated to delivering an efficient and cost-effective solution that enables firms to meet their transparency obligations. The FacilitEx team is working hard to ensure that Trading Venues have a solution in place ahead January 3rd.

Facilitex leverages 10 years of trade reporting experience from Simplitium, resulting in unparalleled expertise in transparency services. We have an unmatched understanding of transparency regulation, its impact, and how to tailor reporting solutions for all market participants.

What are the next steps for Trading Venues to ensure they are compliant by January 3rd?

Trading Venues will need to demonstrate to the regulators that they are taking necessary steps towards compliance, and they need to start now. At Simplitium we are onboarding clients on FacilitEx all throughout December and onwards to ensure that our clients can demonstrate their progress. Contact the FacilitEx team to find out how the new regulation will impact your firm and what we can do to help.