Fixed income market participants are largely ignorant of how the systematic internaliser (SI) regime under MiFID II will affect their business, according to industry experts.
Panellists at The TRADE’s MiFID II pop-up event in London this week agreed other requirements under the regulation are exacerbating SI compliance for non-equities.
Rebecca Healey, head of EMEA market structure and strategy at Liquidnet, explained her own research found that just 13% of fixed income participants felt confident about how to operate an SI on a day-to-day basis.
She said: “When you look at fixed income, this is where people do not have clue due to reporting obligations you need to know upfront.
“What capacity am I trading in? Should we be trading OTC or SI and what are the implications in terms of trade reporting?”
“The buy-side are working with brokers on a solution for this and there are new initiatives all the time in the equities space, but the challenge when talking about the regime with bonds, is it’s less clear how to interact with SIs,” she said.
Kay Swinburne MEP told delegates she fought hard in parliament to ensure the SI regime remained in place for non-equities under MiFID II.
“It took two years and I was assured the regime would not be used as a loophole and it would preserve the way in which fixed income markets function while transitioning,” she said.
Swinburne also explained there will be more sympathy for those trading non-equities products on an SI as regulators do not want to cut off and expose fixed income markets, particularly government bond markets.
The event, sponsored by Bloomberg Tradebook and Trax, saw over 200 industry professionals gather at Bloomberg’s London HQ to discuss the systematic internaliser regime and how it will impact their business.