In a review of MiFID, on which public comment closed on Wednesday, the Commission lays out sweeping reforms to equity market structures such as “dark pools” and high-frequency trading. It also proposes reform of OTC derivatives trading that would require standardised contracts to be traded on exchanges and “organised trading facilities”. OTFs would be similar to platforms called “swap execution facilities” emerging in the US. 

Anthony Belchambers, chief executive of the Futures and Options Association, which represents banks and brokers in the derivatives markets, said a ban made no sense. “These are very dangerous powers. If we’re dealing with a significant product, you could end up exacerbating systemic risks.” The issue could be serious, he said, for non-financial users of OTC derivatives such as industrial companies. Currently many such users of OTC derivatives are set to enjoy certain exemptions from having to process their contracts through clearing houses, because this would add significantly to their costs.
But companies might be deprived from using such derivatives, even though they have the clearing exemption, because the fact that no clearing house offers to clear them could trigger an automatic ban on the products.

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