R&C: Having come into effect in January 2018, what have you observed as the immediate impact of the EU’s MiFID II, widely characterised as watershed legislation?

Stone: To some extent, the revised Markets in Financial Instruments Directive (MiFID II) can be viewed as seeking to determine where transparency may impact liquidity. The regulation provides a framework for incremental assessments of how greater transparency impacts liquidity, with the objective to strike a good balance between both. Immediate impacts of MiFID II include regulators receiving a considerable amount of non-public transaction information from approved reporting mechanisms (ARMs). This enables regulators to gain a greater appreciation of what is happening in the market, who is making decisions and potentially why certain decisions are made. Over the next four years, regulators will provide annual recalibrations with the objective to increase the transparency of the marketplace, not only with pre-trade quotes, but also with post-trade data. Based on this, industry and regulators will hopefully be able to work together to establish where the inflection point is.

Hutchins: MiFID II is particularly important for the fixed income and derivatives market. MiFID I, while it covered broadly the same asset classes, mostly focused on equities. Under MiFID II, transaction reporting has been expanded, particularly for fixed income and derivatives. It really is a watershed moment.

Oct-Dec 2018 Issue

Bloomberg L.P.