Speakers A panel discussion

The Return of the MiFIDs, 2010-2012+

We had a fun meeting of the financial services club this week, looking at the implications of MiFID, the Markets in Financial Instruments Directive, and the outlook for MiFID II, or MiFID2 if you prefer.

I’ve referenced the revision of MiFID before and included a great white paper by Philippe Guillot of CA Cheuvreux for reference.

Equally, we now see more developments taking place, including investigations by CESR – the Committee of European Securities Regulators – that will conclude at the end of May, and covers 107 questions across a broad spectrum of issues:

Investor protection and intermediaries

• Telephone recording
• Execution data quality
• Instrument complexity
• Personal recommendations
• Supervision of tied agents
• Options and discretions

Equity markets

• Pre-trade regime for RM/MTFs
• Definition of Sis
• Post trade transparency regime
• Extended scope of transparency
• Regulatory framework for consolidation and cost of market data
• RM and MTF alignment and crossing networks
• Eliminating options and discretions

Transaction reporting

• New trading capacity (riskless principal)
• Counterparty and client identifiers
• User guidelines (how to fill in the reports)

There are also bigger issues, such as the post-trade clearing environment and its challenges. For some time, there has been reference to a Clearing & Settlement Directive for example, and MiFID2 is meant to address this.

It is also meant to address the fragmentation of trade reporting and the price tape.

It may also pop a whack at ‘dark pools’ and high frequency trading.

For all we know, it could even re-regulate the new electronic trading platforms – most of which are yet to wipe their face with a profit – and make them completely unworkable by introducing reporting rules and overheads that are as onerous as the ones that traditional stock exchanges have to work with.

Now, to be clear, we don’t know what’s in MiFID2 right now – we won’t really know until 2012 or after when the new regulation is drafted – but there are some pretty good guesses and so, in order to find out what those guess would be, we gathered an expert panel on star wars day (May 4th):

• Andrew Allwright, Business Manager, MiFID Solutions, Thomson Reuters
• Andrew Bowley, Head of Electronic Trading Product Management, Nomura
• Hirander Misra, CEO of Algo Technologies Ltd and former COO, Chi-X
• Philippe Guillot, Global Head of Trading and Execution, CA Cheuvreux
• Willy Van Stappen, COO, Equiduct

to debate and discuss. Here is the outline of the evening:

MiFID Wave 2 Discussion, May 4th 2010 from Chris Skinner on Vimeo.

For full access to this knowledge, join the Financial Services Club.

Meanwhile, there are some rapid fire changes ahead with key dates this year including:

April

The FSA formed a MiFID working party and trade associations, such as FIX Protocol, ISITC, FISD and RDUG all have meetings looking at the implications of MiFID 2.

May

CESR hearings on key questions and issues around MiFID2 and closure of consultation at end of month.

June

The MiFID JWG, Joint Working Group, reforms on 9th June in a meeting at Thomson Reuters.

Wow!

The MiFID JWG reforms.

Can’t wait to be there ...

Background:

A panel discussion with:

• Philippe Guillot, Global Head of Trading and Execution, Chevreux
• Andrew Bowley, Head of Electronic Trading Product Management, Nomura
• Hirander Misra, CEO of Algo Technologies Ltd and former COO, Chi-X
• Andrew Allwright, Business Manager, MiFID Solutions, Thomson Reuters

The European Commission plans to expand MiFID trading rules to tackle issues missed by the original document, as calls mount for a second version of the controversial directive.

The European regulator had been set to undertake a small-scale “technical” review of the 2007 directive, which outlawed rules forcing firms to use stock exchanges. However, sources familiar with the situation said the study might now include “more wide-ranging elements”.

Among changes that could be on the agenda are new rules on over-the-counter and structured products, a pulling together of trade-reporting requirements and tighter rules around the definition of “best execution”.

Philippe Guillot, Global Head of Trading and Execution, Chevreux

Philippe has worked in the financial industry for over 20 years. Currently he is Global Head of Trading and Execution at CA Cheuvreux, where he has worked since 1998. During this period he has spoken at various seminars and working groups on MiFID and Best Execution and co-authored articles in Institutional Investor, The Trade and Best Execution. Prior to this Philippe took on various roles from centralized dealing to SEAQ market-making at Enskilda Securities, and from floor dealer in Bonds to Equities sales-trader at James Capel (now HSBC). Philippe holds a degree in Private Law from the Université de Paris XI.

Andrew Bowley

Andrew is responsible for new product design and implementation and product management primarily for the Electronic Trading Services unit at Nomura, after the acquisition by Nomura of the European and Asian equities business of Lehman Brothers. His work includes the development of Nomura’s dark pool offering NX, smart routing, dark routing, and all MTF access and coordination. Andrew originally joined Lehman Brothers in 2004 to oversee the implementation of the firm’s new global connectivity system and market side connectivity platforms, focussing on the cash equity DMA and algorithmic trading franchise and related electronic services. Prior to Lehman Brothers, Andrew spent 7 years at Dresdner Kleinwort. He has qualified as a Chartered Accountant at KPMG and also worked at JP Morgan.

Hirander Misra, CEO of Algo Technologies Ltd and former COO, Chi-X

Hirander Misra is Chief Executive of Algo Technologies, a new firm supplying systems to high-frequency traders and which taps into the increasing demand for ultra-fast trading systems. Previously he was the Chief Operating Officer at Chi-X Europe. Under Misra’s tenure, Chi-X became the European venue of choice for HFTs, which typically arbitrage tiny price differences between Chi-X and the primary exchange where the stock is listed.

Andrew Allwright, Business Manager, MiFID Solutions, Thomson Reuters

Andrew joined Thomson Reuters in March 2005 to shape the information vendor's response to MiFID. Andrew was previously a Director within CSFB's London-based Equity COO team and during this time was the company’s representative on the LIBA Securities Trading Committee.