SIX Survey Shows Split Over MiFID II Capability to Change Liquidity Landscape

Only 26 percent of those surveyed believed that only a ‎handful ‎of dark liquidity pools are ready shift to lit

About five months into MiFID II, investors in shares, fixed income, structured products and ‎exchange-traded funds (ETFs) are split over whether the European Union’s ‎long-anticipated implementation of the new reforms has been successful. ‎

That’s according to a survey of traders conducted by the SIX Swiss ‎Exchange, which assessed the shakeup to the multi-trillion-dollar markets ‎under the European Union law that came into effect on January 3.‎

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A closer look at the results shows that there is a solid ‎consensus that the new trading and reporting rules have had a strong positive ‎impact on market transparency, but have not adversely affected the current ‎distribution of liquidity sources. ‎

Specifically, the study found that just 26 percent of those surveyed believed that only a handful ‎of dark liquidity pools are ready to shift to lit markets.‎ As part of MiFID II’s aim of developing more transparent markets, trading in dark pools is to be restricted.

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‎As one might expect, the results show that many traders are not yet sure how to navigate ‎these changes.‎

Reporting Challenges

When asked about their primary challenge, 86 percent of respondents cited “transaction ‎reporting” as the biggest threat, while just 36 of respondents considered best execution ‎reporting changes to be the most critical issue.‎

Further results point to roughly 87 percent of those surveyed as expecting ‎the increased levels of volatility seen in the first quarter to continue in the months ahead. ‎A smaller percentage cited regulation such as MiFID II as their top concern ‎in 2018. The figure was reported at 46 percent, compared with 73 percent in 2017.‎

Results were gathered from more than 174 traders from ‎across Europe, of which 53 percent traded in shares, 19 percent in Fixed Income, ‎‎14 percent in Structured products and 13 percent in ETFs/ETPs or other products.‎

Commenting on the findings of the survey, Tony Shaw, Director London Office, Securities & ‎Exchanges at SIX, said “This variance in responses highlights the reigning uncertainty among ‎traders. Over time, market developments will provide more conclusive answers on the ‎success of MiFID II. Despite the optimism of some traders, there is no consensus on ‎whether MiFID II can be deemed a success. Our research demonstrates a large ‎difference of opinion among market participants.”‎

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