September 21, 2018

In the not too distant past, it may have been difficult to ascertain whether a kick was offside or ball was over the line but in the past few years, innovative technology such as Hawk-Eye electronic line calling system in tennis, Television Match office (TMO) in rugby, or the Video Assistant Referee (VAR) in football has levelled the playing field. This in turn has renegotiated the fundamentals of the respective games. But there was resistance at first and parallels can be drawn with the recent slew of new regulations in the financial services sector, such as MiFID II.

Buyside participants are feeling the pressure to prove that they are delivering Best Execution for their end users and to comply with the more stringent pre and post trade reporting requirements embedded in RTS articles 27 and 28.  In effect there should be no place to hide as they provide clients with a clearer and ongoing view of their orders while they make their way through the marketplace. However, almost nine months after the sweeping reforms have come into effect, the picture is not always as translucent as it should be.

Concerns have been flagged by certain regulators, most notably the Autorité des Marchés Financier, who in its recent Markets and Risk Outlook, the French legislator, noted “the jury is still out.” They queried whether MiFID II’s objective of increased transparency could be met especially given the increased use of the reinvented systematic internalisers and whether this was a way participants were circumventing the double volume caps. SIs allow institutions to trade shares away from the market if they transact customers’ deals on their own accounts.

Perhaps then it is time to take a leaf from the sporting world’s play books. There was also opposition at the beginning when these new video and real time tools were introduced. Change always rattles people but there were also complaints that the technology would take the fun out of the game. Is this because on court or pitch battles can liven up a dull game? Most would now argue though that switching on of the technological floodlight has helped umpires make correct decisions which in the end has meant a better experience for both the player and spectator.

Trading in lit markets such as Aquis is also a much fairer proposition with greater transparency, innovation and competitive pricing.  In other words, no punches are being pulled.

by Lynn Strongin Dodds