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These plans envisage the establishment of a network in which both Sis and HFT firms interact, in a manner that the market operators describe as being multilateral. For example, a participating SI would collect client orders (including orders from retail clients) and route them through the HFT firms for back-to-back execution involving other participants in the network. Market operators argue that this network amounts to a multilateral trading facility (MTF) and should be authorised as such. As there is a risk that such broker crossing networks may not be considered as a multilateral trading system by all competent national authorities, market operators fear that some variants of broker crossing networks may not be required to be authorized as MTFs.
Market operators are also concerned that the potential broker crossing networks will be used to execute retail orders. They believe that all retail orders referring to the acquisition or sale of equity should be executed on regulated stock exchanges. They also believe that allowing the above-described broker crossing networks to proliferate will lead to fragmentation and hamper price discovery, a result they argue as running counter to the goals pursued with MiFID II.
Letter to Commission on SIs operating broker crossing networks
Reply from the Commission on SIs operating broker crossing networks
Follow-up on SIs operating broker crossing networks