As my bio states quite clearly - 30 years in the financial industry. Memories of an age that was pre electronic trading as we know it today. Days of floor traders, open outcry, funny coloured jackets, dodgy haircuts and huge mobile phones. Anyone who was involved that long ago will have stories to tell of markets that were not always the most efficient, but that did work, ultimately. We were, of course, regulated, but in a different way than the markets are now facing going forward.
As the markets have evolved with the proliferation of electronic trading, so has the scrutiny of the regulators across the globe. It is now over 11 years since the term Markets in Financial Instruments Directive (MiFID) was first used, and the main objectives outlined at the time were to increase competition and consumer protection in investment services.
The Directive sets out conducts of business and organisational requirements for investment firms, authorisation requirements for regulated markets, regulatory reporting to avoid market abuse, trade transparency obligation for shares, and rules on the admission of financial instruments to trading.
MiFID II / MiFIR (Markets in Financial Instruments Regulation) was the next step and that gave ESMA (European Securities and Markets Authority) the powers to propose regulatory technical standards (RTS) and, ultimately, implementing technical standards (ITS), which will be the submission to the European Commission (EC) mentioned at the top of this blog.
That’s the timeline we all know too well, though as always, the devil is in the detail.
FIX Trading Community has been involved with regulatory matters across the globe for a number of years. The members have provided responses to consultation papers, offered recommendations to regulators and met with them to try and assist with an expanding regulatory environment. There has been an appreciation of this as our mission to promote the use of standards within the industry has been understood and welcomed by regulatory authorities.
In May 2015, the EMEA Regulatory Subcommittee met and decided to form a number of different smaller subgroups to look in more detail at specific RTS items where it was felt that FIX could have a positive impact and make appropriate recommendations to ESMA. The subgroups are focused on Order Data and Record Keeping, Clock Synchronisation, Reference Data, Transparency, Best Execution and Microstructure. Following a call for participation, each subgroup has met and decided on its own respective terms of reference and goals. That is not to say there has not been some debate on each of the initial calls. As anyone who has been involved in MiFID II discussions will appreciate, there is a degree of interpretation with a number of the different RTS’s. However, the aim of the subgroups is to provide tangible documentation to ESMA in the next months which can then be reviewed and possibly used in the final submission at the end of the year.
FIX Trading Community is somewhat unique in being able to call upon the expertise of the Sell side, Buy side, Vendors, Exchanges and other Trade Associations to address these sorts of challenges. Our mission statement encapsulates what part of the regulation is looking to do, namely “delivering operational efficiency, increased transparency, and reduced costs and risk for all market participants.” By promoting the use of standards, we do believe the increasing amount of regulation will be easier for the industry to implement and will be easier for the authorities to enforce and then monitor going forward.
By Tim Healy, Global Marketing and Communications Manager for the FIX Trading Community and bobsguide Contributing Editor