Potential confusion arises, however, when the objects of the two pieces of regulation are considered. For example, EMIR establishes the organised trading facility (OTF) as the European equivalent of Dodd Frank’s swap execution facility (SEF) and mandates central clearing for swaps. It also contains important new rules relating to pre- and post-trade transparency. Transparency is also in-scope for MiFID II, but within the context of market abuse. It also mandates OTFs and says that certain instruments have to trade on certain venues.
Although MiFID II is focused on much of the same infrastructure mandated by EMIR, its emphasis is on the elimination of pricing advantage and improving the ability of buy-side players to know where the market is trading. This anti-market abuse construct is also explicit in its restrictions on high-frequency trading and limits on commodity positions.
With both pieces of regulation destined to change the way banks conduct their trading activities, especially in derivative markets, trade associations and other industry lobbyists are focusing to push back on EMIR, which is expected to be the first set of rules to become binding in Europe.
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