Deutsche Bank first to register as fixed income, derivatives SI

Latest systematic internaliser registered will serve bond and derivatives traders.

Deutsche Bank has set up as a systematic internaliser (SI) for bonds and derivatives trading under MiFID II.

The German bank will launch the new trading platform on MiFID II’s start date on 3 January 2018, ahead of the official go-live of the revised SI regime in September.

“By registering early as a Systematic Internaliser, we will be in a position to help clients by taking on post trade reporting duties as soon as the obligations come into force… For clients this removes one of the challenges to comply with the new regulation and creates certainty when trading with Deutsche Bank,” explains Mario Muth, head of fixed income electronic sales and head of fixed income market structure, Deutsche Bank.

An SI is an investment firm that deals on its own account by executing client orders outside of a regulated market, multilateral trading facility (MTF) or organised trading facility (OTF) under MiFID and MiFID II.

Most banks have already registered as an SI for trading cash equities, including Goldman Sachs, JP Morgan, Credit Suisse and Morgan Stanley, among others.

However it remains unclear how the majority of firms will apply the SI regime to fixed income and derivatives trading, largely due to complications with the reporting obligations under MiFID II.

Speaking at a pop-up event hosted by The TRADE earlier this year, Rebecca Healy, head of EMEA market structure and strategy at Liquidnet explained to an audience: “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 added.