January 8, 2018

Although MiFID II is now an actuality, there are sure to be several asset management firms that are not fully ready. They may have crossed the finishing line on 3 January, 2018, but then have to scramble for the next six months to a year to ensure that they are completely compliant.  However, whatever state of preparedness they are in, hitting the Best Execution mark can no longer be a perfunctory task and they will have to up their game to achieve the best outcomes for their clients.

Buyside firms are, for the first time, not only be obliged to disclose the identity of the execution venues they use but also submit data on the quality of that execution. They are not the only ones who will have to prove their execution acumen. A harsher light will also be shone into the inner workings of stock exchanges, alternative trading platforms and systematic internalisers who will have to report on a quarterly basis a granular and detailed assessment of the quality of the liquidity they provide.

In other words, the end client, as the regulation intended, will have the standardised information at their fingertips to compare and contrast the services they are receiving. There will literally be nowhere to hide in this much more open and transparent regime. Aquis Exchange is well placed to take advantage of the new world order as a lit exchange with significant depth of liquidity, which heeded the advice of soothsayers three years ago who warned about the pitfalls of not meeting the 2018 deadline on time.

In fact, Best Execution, innovation and client focused services have been the cornerstones of Aquis’ philosophy right from the beginning, informing everything the Company has done since inception. It started with a novel subscription pricing model whereby Members are charged on the message traffic they generate on a fixed monthly tariff. This translates into unlimited trading for a set fee, making the marginal cost of trading zero.

Aquis also took the unusual step of banning aggressive non-client proprietary trading in order to protect its market from toxic liquidity. Although considered contentious at the time by some segments of the industry, the move has paid off as the Exchange is now the largest provider of liquidity on the touch outside of the national markets for the top 500 European stocks.

Underpinning the strategy is the latest technology, including one of the most cost effective as well as fastest matching engines in Europe, which can make a round trip in around 17 micro seconds. It is also more than happy equipping others to overcome the regulatory hurdles ahead and licenses the matching engine and market surveillance technology to a wide range of market participants including competitor exchanges.

Add all these factors together and it is no wonder that Aquis has been looking forward to and not dreading the arrival of MiFiD II.  It has been disrupting the exchange landscape long before the latest incarnation of the regulation and it is more than ready for the Best Execution challenge.

by Lynn Strongin Dodds