For seven years the FIX Trading Community have been bringing together the European trading community for a one day event called the EMEA Trading Conference which is full of key notes from high quality speakers, exhibitions from reputable vendors and a great networking opportunity for industry delegates.
Divided into a day full of keynotes, panel discussions and separate business and technical streams, delegates and speakers are encouraged to debate issues that the industry is facing, whilst gaining a greater understanding about how to tackle everyday concerns.
FIX opened their annual EMEA Trading Conference yesterday by outlining some of the initiatives they plan to work on this year which include cyber security and their aim to help with threats, their continued efforts to work with industry associates and also with the European Securities and Markets Authority (ESMA) on the Markets in Financial Instruments Directive II (MiFID II).
This year one of the biggest themes at the EMEA Trading Conference was regulation, and in particular MiFID II. It was evident from keynotes, panel discussions and streams that the trading community is still facing uncertainty on how to approach MiFID II compliance.
Having already dealt with MiFID I which was applied to the UK in 2007, the revision to improve the functioning of financial markets and strengthen investor protection in light of the financial crisis (in the form of MiFID II) is expected to be introduced in January 2017.
Attitudes towards compliance of MiFID II included frustration over the fact that brokers will have a lot more work to do because unlike MiFID I which allowed the buy and sell-sides to work quite separately, MiFID II will require them to work a lot more closely together and will encourage greater competition in trading platforms.
The concerns outlined by industry experts included the FCA’s decision to provide companies with a set of processes to adhere to but their failure to define them. Sell-side brokers were encouraged to understand what technology and risk processes the firms they work with currently have in place before going forward.
A large part of MiFID II focuses on unbundling which industry experts believe will change the dynamics of how the trading world works at the moment. ESMA gave technical advice about unbundling in a paper at the end of last year and according to the Financial Times, confirmed the practice by which asset managers receive research from broker firms in exchange for using those brokers to execute trades should be seen as an “inducement”. ESMA suggested that the research obtained from broker firms should only not be considered an inducement if it is directly paid for by asset managers, by gaining fees from investors or using their own money. It also suggested that asset managers and brokers sign a commission sharing agreement, through which the cost of research and cost of execution are unbundled.
Although MiFID II was the hottest topic of the day, one of the streams entitled ‘Financial Markets Cyber Security – Profile and Prognosis’, was the first-ever panel on cyber security at a FIX EMEA Trading Conference. The panel discussion highlighted that 88 per cent of companies now include cyber risk in their risk management processes and interconnected networks, adoption of cloud services and mobile have all left companies more open to hacking, and there has been an increasing number of malware found on mobile devices. Some other issues highlighted during this discussion were geo-political monitoring and the impact that an organisation's security posture can have on national systemic exposure, an area which organisations were warned to look into now as regulators may decide to explore it further in the future.