The European Commission has proposed changes to the way the equities and derivatives markets are traded in its review of the Markets in Financial Instruments Directive. That sparked competition in share trading between exchanges and other new types of trading platforms, as well as the use of off-exchange venues and a proliferation of market data. Regulators have suggested such fragmentation, with multiple ways for data to be reported, has made it hard for investors to compare prices across venues, making Europe’s share markets less transparent.

The Commission is reviewing MiFID and has proposed measures that would force dark pools to make certain prices public, going back on MiFID’s original allowance that certain types of order be exempt from pre-trade price display in certain circumstances. 
However, Liquidnet, the largest operator of dark pools, warned some of the proposals would prevent “tens of millions of European citizens” from benefiting from reduced transaction costs. In a draft letter to the Commission, Liquidnet said: “If we restrict institutions from using systems ...  that allow [them] to negotiate and trade blocks directly with other institutions, we are preventing institutions from fulfilling their obligation of best execution to their tens of millions of individual customers in Europe.”
Vlad Khandros, market structure and public policy analyst at Liquidnet, told FT Trading Room: “Transparency at a high level sounds great but when you get to the implementation level it could be disastrous, and that’s when you start having huge unintended consequences.”

 Robin Poynder, head of FX and money markets in Europe at Thomson Reuters, said IOIs were a critical part of the FX forwards market for institutional investors wanting to trade in large sizes. “We think the G20 reforms are a good thing, and we are all in favour of greater transparency,” he said. “But what we want to avoid is unintended consequences, something that increases the cost to end users.¨

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