Second Equiduct sponsored MiFID white paper focuses on market transparency and the likely make-up of the CESR Liquid List

19 March 2007

* Andy Simpson authored white paper identifies how MiFID¹s transparency obligations will play a key role in exposing the darker areas of liquidity to regulatory scrutiny

* Provides detailed break down of CESR¹s forthcoming Pan European list of liquid shares

Equiduct has released the second white paper in its series of six free Equiduct sponsored documents written by industry experts that have been commissioned to provide an independent perspective on MiFID and its likely impact on the equities market. The second white paper is titled Market Transparency: Is this the CESR Liquid List? and can be downloaded from. Written by Andrew Simpson, the paper identifies the importance of the CESR Liquid List, highlights the key unanswered questions around its construction and puts a case for an extended list that could serve as an important reporting point and a solid indicator of the EU economy as a whole.

The paper contrasts the likely CESR liquid list with existing European Equity Indices and examines how Andy Simpson believes CESR will build the list by looking at shares from each of the 27 European Member States and establishing whether they are Œliquid¹ as defined by Article 22 of the MiFID regulation. He also speculates whether the list will be the CESR598 or
CESR622 and comments on the potential need to extend the CESR list to all
1,285 shares on the combined CESR and European Equity Indices liquid stocks.

In addition, the white paper also investigates five key issues that will affect the construction of the liquid list and its likely success:

* the questionability of the extremities of the list
* the impact of the CESR list on dark pools of liquidity
* the importance of post-trade reporting and the emergence of new venues that offer the facility to trade across the entire CESR list
* the market impact of the liquid list in terms of costs and competitiveness
* the potential implications of opening up smaller national markets to the stark light of pan European price formation

³MiFID is all about levelling the field for all market participants across Europe, extending transparency including the delivery of pre- and post-trade data and opening the markets to competition. This second white paper clearly shows how important the CESR liquid list will be in promoting price discovery and Andrew has produced a very clear analysis of the likely make-up of the CESR list,² commented Bob Fuller, CEO of Equiduct. ³He clearly shows how the liquid list will provide a solid pan European equity foundation, and details the likely impact of such a list for the market.²

³We expect the publication of the CESR liquid list to increase the attractiveness of pan-European equity trading ­ which is why at Equiduct we have created a new execution venue that will help deliver on the MiFID vision and help organisations trade efficiently across current borders and deliver best execution in the pan-European market,² he continued.

³The publication of the CESR liquid list is already increasing the attractiveness of European equities trading, and new execution venues will demonstrate the MiFID vision of a truly pan European market,² added Andrew Simpson. ³There is still a great deal of uncertainty about how CESR plans to construct its liquid list, so it is great that Equiduct has provided a platform for this debate in the run up to MiFID becoming law in November.²

Andrew Simpson is a management consultant who specialises in capital markets. He has been working with and advising on the MiFID text since January 2005 where he was part of the team at the FSA working on key aspects of its technical and business impact.

The Equiduct series of MiFID related White Papers is available for free download from its website. The first white paper in the series was authored by Marcus Hooper and examined the key requirements of MiFID Equity Best Execution.

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