Internal Market Commissioner Barnier said that the Commission is looking at competition between trade venues as well as investor protection and transparency. Barnier stressed that financial markets have experienced a rapid development of technology which should be tackled in MiFID review in order to avoid flash crashes such as the one that happened in the NY stock exchange on 6 May 2010. Moreover, he emphasized that the EC will be carefully looking at High frequency traders (HFTs).
Concerning commodities trading, Barnier said that speculation on this market clearly exists and it should be urgently tackled in order to avoid distortions in commodities prices. Furthermore, MAD review will also improve the oversight of commodities markets and the EC will not hesitate to engage in more restringing measures on this issue.
Agriculture Commissioner Dacian Cioloş highlighted that future commodities markets must serve the real economy by helping the agriculture sector to mitigate risks such as the impact of climate change. He strongly advocates for a more transparent and supervised commodities market.
ECON Chairwomen Sharon Bowles explained that it is essential to look at the ultimate need of users and investors. They need more choice which will stimulate responsible innovation. Protection is also needed so investors will be fully informed. Speaking about high-frequency, she said that it is not recommended to forbid all HFTs transaction; however, there is an urgent need to control this type of transactions. She added that MAD should also look at HFT and flash orders.
She said that there is a real risk of swimming in data, and it is not the collection of the data what market participants need, it is the analysis of that data that will make markets safer. Moreover data that can be fully consolidated and analyzed across assets classes is needed.
For CESR Chairmen Carlos Tavares, the crucial points to be considered in MiFID review are:
1) Make transactions reporting a useful tool;
2) Urgently implement the consolidate tape, so far the industry has not been able to provide it and find out how could it be made available soon;
3) Revise the best execution and adopt the necessary mechanism for implementations and monitoring;
4) Reduce opportunities for regulatory divergence, for example move to a more rule-based regime for pre-trade transparency;
5) Strengthen investor protection in relationship with investment firms; and
6) Regulate the new trading modalities (HFT, algorithmic trading and the flash crash lessons). Bring whenever possible OTC bonds and other products in organized trading venues.
Finally he said that the “new MiFID” should leave room to ESMA to set its principles.
1) Panel on derivatives: geared for a paradigm shift
Eurex Executive Director Brendan Bradley urged the Commission to provide a proper definition of organized trading venue because it is a cornerstone of MiFID and so far it has not been properly defined. As regards trade repositories, he believes there should be mandatory reporting because it will be positive to control systemic risk. However, regulators are looking at post-trade clearing, post-trade reporting and what it is not mentioned is the pre-trade elements. MiFID review should look whether pre-trade price transparency really exists. Mr Bradley also remarked that an Exchange is in itself a trade repository because all the information remains there. Moreover, Eurex believes that some data provided by trade repositories is too technical and too aggregated which it is not so helpful for investors. He also said that Multi Trading Facilities are not regulated on the same extend as organized trading venues, and at the end of the day it is better to provide a level playing field.
Håkan FEUK from E.ON Energy trading, highlighted that there is a need to have tailored made regulation for energy trading and this will lead to a propionate regulation. He also believes that current MiFID exemptions for non-financials should remain.
2) Panel on transparency, efficiency and soundness in the trading of financial instruments
Roland Bellegarde from NYSE Euronext said that it is essential that confidentially rather than opacity be applied in MiFID review. He also added that a possible solution to improve transparency could be to introduce a minimum threshold. He added that it could be ESMA the responsible authority of defining who report what to whom.
Maria Velentza from the Commission remarked that flash orders are currently prohibited by MiFID, but that the Commission will have to see whether the provisions are clear enough.
3) Panel on the changing face of trading-achieving a level playing fields for trading venues and market participants
Karel Lannoo from CEPS highlighted that it is very complicated to reach the right balance between fragmentation and competition on one side and transparency and liquidity on the other side. He believes that the Commission’s review of MiFID will be a radical review and not just a partial review as some market participants think.
David LESTER, Director of Information Services and Chief Executive Turquoise disagreed with Lannoo and said that he believes that MiFID review should be partial as there are just few things to be changed. He said that post-trade recording tape and common standards should be clarified. He mentioned that LSE runs a dark pool and dark pools should keep existing because they provide liquidity.
Judith HARDT, Secretary General of Federation of European Securities Exchanges defended HFTs and said that in general it is positive because of the liquidity this type of transactions introduce in the system, however, she believes that the legislators should limit “the speed” of these transactions.
4) Panel on data consolidation
General concerns on this issue are:
· Trade reporting problematic;
· Cost of data access increases;
· Best execution made harder;
· Application of data consolidation to equity versus non equity markets; and
· Post- Vs pre-data consolidation
© European Commission
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