The LMAX Exchange Group has launched a new FCA-regulated brokerage unit called LMAX Global. The new entity complements the firm’s existing multi-lateral trading facility (MTF) LMAX Exchange.
The move was prompted by the introduction of the MiFID II EU-wide regulatory framework that is taking place today (3rd of January 2017). After years of deliberations and delays, the second stage of the supranational regulatory framework over the financial markets which European authorities have been devising is controversially being deployed, despite worries expressed by many market participants.
To comply with the new requirements, LMAX has been forced to separate its MTF and broker businesses. Under MiFID II, MTF and broker businesses must be operated as two distinct legal entities as an MTF operator is not allowed to execute client orders against proprietary capital or to engage in matched principal trading on its own MTF.
Commenting on the corporate restructuring, the CEO of LMAX Exchange Group, David Mercer, said: “MiFID II’s underlying message is about fairness and transparency, which we wholeheartedly support. We have long been an advocate for complete transparency on trading costs and execution quality, and our exchange style execution model was designed specifically to treat all market participants equally regardless of status, size or activity levels.”
“We welcome the introduction of MiFID II and we are pleased to assure customers that they will receive the same transparent, precise and consistent execution, with no ‘last look’ as standard,” he added.
LMAX Global will be accommodating the needs of brokers, money managers, and non-institutional accounts in accordance with the MiFID II regulatory changes. These clients will be getting global access to the LMAX Exchange firm liquidity and execution services.
The company outlines that no changes are being made to the account numbers, trading conditions, fees and overall client experience.
LMAX Exchange will continue to serve the needs of institutional clients that are trading spot FX, precious metals, and indices. The entity will continue to operate as an FCA regulated MTF.
Derivatives Markets Impact
The introduction of the new regulatory framework in the EU carries increasing compliance costs, especially for firms that are dealing with derivatives. The legislation has been in the works for years and its implementation is likely to change some markets for good. While some industry experts are worried about the market impact, others are optimistic about the long-term benefits for clients from the MiFID II legislative framework.
Undoubtedly, the main impact will not be on spot FX trading, where LMAX is positioning itself. Trading venues that are processing orders on FX swaps, forwards and options are more likely to see their trading volumes impacted.
While the majority of the EU-member countries have implemented the required legislative changes to their laws, nine others are still lagging behind.