Factors to address around MiFID II market infrastructure changes

Market infrastructure and significant business change

Given that MiFID II embraces such a complex and far reaching set of rules, many firms will need to consider market infrastructure and significant business changes if they wish to remain competitive after the legislation comes into force.

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Building a response

Teams focused on market Infrastructure will need to actively address a number of internal and external factors when considering how they will address MiFID II and MiFIR to build a firm’s response. 

Addressing external and internal factors

Externally, firms will need to address how the new regulated trading venues, a changing liquidity landscape and an obligation to trade shares and certain derivatives on trading venues will affect the business operating model and decide how to react.

Firms will also need to bear in mind that transparency will bring a new level of competition and it will be essential for firms to take advantage of the new information if they are going to stay in the game.

Competitive quotes, additional liquidity sources, trade notifications and multiple event triggers will all be available to help the firm price more keenly and trade more effectively if the information is accessible to the traders and their trading tools.

Internally, supervision, monitoring and control will be key as you design the tools and procedures required to keep your firm compliant and competitive.

As far as electronic trading is concerned, tighter controls around algorithms, High Frequency Trading (HFT) and Direct Electronic Access (DEA) require not only more stringent testing and back-testing of algorithms, but real-time supervision and monitoring at both the desk and independent operational/risk control points.

With voice trading, the combined effect of new trading mandates, investor protections, product control and best execution requirements will result in significantly greater workload at the point of sale.

Having accurate, up-to-date client and product data and an understanding of the rules of how to handle each quote and trade will be overwhelming for the sales desk without the support of a new set of tools. While many firms look to design and implement these toolsets, they will need to consider a data strategy that will support decision making.

Ongoing MiFID support

From an external perspective, we are committed to bringing together as many of the new data sources as practical, whether it be new Systematic Internaliser quotes, OTC trade reports from APAs, new trading venues or just new transparency data from existing markets.

We will bring them together through Elektron Real Time data feeds, or display them on Eikon, providing you with the most comprehensive, aggregated views on market activity.

From an internal perspective, Thomson Reuters Tick History is ideally positioned to provide data for algorithmic testing, providing the ability to replay over 10 years' worth of tick-by-tick data across the full range of global asset classes supported by Thomson Reuters.

On-demand access provides you with a window to differing market conditions, volatile or calm, to ensure the safe development and deployment of new algorithmic strategies.

DataScope Select is designed to provide instrument and entity reference data, pricing services and derived analytics across all asset classes via a single source and consistent retrieval methods.

We are an originator, consolidator and value add re-distributor of data with hundreds of sources and partners and committed to fully supporting the scope changes, additional data points, flags and new data sources as they become available in the MiFID II environment.

Key instrument data will be enriched with ESMA attributes including liquidity status, pre- and post-trade LIS and SSTI Thresholds, temporary waivers, delay, official transaction figures to name just a few.