Download “MiFID and Regulated Markets”

The Impact of MiFID on the European Exchange
Landscape and the Future Of Market Structure
Burçak Inel, Head of Regulatory Affairs,
Federation of European Securities Exchanges
London, 28 June 2006
[email protected]
www.fese.org
Outline of Presentation
• Introduction to FESE
• What are the major structural changes brought on
by the MiFID regime?





Key features of Level 1
A new framework for Regulated Markets
Greater competition among execution venues
Key features of Level 2
Issues to be tackled at Level 3
• What are the opportunities and challenges for
Europe’s markets?
Introduction to FESE
•Whom do we represent?
•Established in 1974 as a small forum of Stock Exchanges in Europe, FESE today
has 24 Full Members, representing 36 Securities Exchanges from all the countries
of the EU, Iceland, Norway and Switzerland as well as 6 Corresponding Members
from other non-EU countries.
•What do we do?
•Interest representation
•Forum for dialogue and cooperation
•Statistics and Market research
•Sponsorship of research and conferences
•How are we organised?
•Secretary General: Judith Hardt
•Secretariat in Brussels, Belgium
•Representative member groups
•MiFID Task Force:
•Representatives from all FESE members
•Meeting on an ad hoc basis
•Chair: Ludovic Aigrot (Euronext)
FESE Members
24 Full Members
36 exchanges
6 Corresponding
Members
Key figures
Market Value
> 10,000 billion EUR
Turnover1
> 17,000 billion EUR
1.6
300%
1.4
250%
1.2
Turnover
200%
Market Cap. growth
1.0
150%
0.8
100%
0.6
50%
0.4
0%
0.2
-
-50%
Jan-94
1Annual
Jan-95
Jan-96
equity turnover
Jan-97
Jan-98
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Market Cap. growth
Turnover - EUR billions
Liquidity pool
Key Aspects - Level 1
•Single passport for investment firms
•One set of conduct of business rules
•Rules applicable to trade execution venues
•Best execution
•Transparency/reporting rules
•Content
•Timing
•Channels
Major structural changes:
A new framework for Regulated Markets
 Definitions of Market Operator & Regulated
Market: accommodating various market
models
 Operator’s requirements:
 Management and controlling interests
 Organizational requirements
=> Mainly best practice
A new framework for Regulated Markets – cont’d
 Requirements regarding admission of financial instruments to
trading & mechanisms to verify compliance with issuers’
transparency obligations
 Requirements regarding pre- and post-trade transparency of
RM
 Requirements regarding membership in RMs
 Monitoring of compliance by members with RM rules and
identification of breaches of the rules, disorderly trading or
market abuse
=> Some requirements that were in market rules are now at EU
level (consequences for flexibility/innovation)
Competition Among Venues - MTFs
• MTF=RM for shares traded on RMs
• National regime for MTFs trading
other instruments
• Two-way competition
Competition Among Venues - SIs
•For some jurisdictions, this represents a
major change
•Differences with RMs/MTFs
•Duty to clients
•Commitment of capital
•Achieving a level playing field
Important features of Level 2
•SI definition
•Best execution
•Post-trade transparency
Issues for Level 3 and beyond
Level 3:
• Data consolidation
• Best execution for non-equities
• Others where common guidelines are useful
Level 4:
• Transposition: Timeliness & accuracy
• Enforcement
Impact on European markets
Opportunities:
 Integration of markets
 Greater competition
 Cross-border investments
 RMs can play a key role in assisting firms to comply with their
obligations
 RMs have incentives to innovate and to serve customers better
 Context beyond MiFID also important
Challenges:
 Fragmentation of liquidity
 Fragmentation of price data
 Level playing field among venues
 Global competitiveness of our markets is paramount!