The European Parliament’s Economic and Monetary Affairs Committee (ECON) will finalise its amendments to MiFID II by 10 July, setting out its stance on key trading and market structure issues.
The ECON meeting follows the submission of MEP’s individual amends to MiFID II, based on prior meetings and an initial set of proposed modifications to the European Commission’s October 2011 draft of MiFID II by Markus Ferber MEP.
Ferber is tasked with leading ECON’s review of MiFID. A number of the German MEP’s initial amendments – particularly those on market access and the treatment of broker crossing networks (BCNs) – caught a number of market participants by surprise. Ferber proposed recategorising BCNs as multilateral trading facilities or systematic internalisers, shunning the organised trading facility (OTFs) category introduced in the Commission’s MiFID II draft.
OTFs were designed as a venue type that would allow their operators discretion on how orders are matched, while imposing transparency requirements that have hitherto been lacking for BCNs. Although he did not support the use of OTFs for equities, Ferber did back their use for other asset classes, including OTC derivatives that will be traded on exchange-like platforms after the implementation of the European market infrastructure regulation.
Ferber also wanted to ban direct electronic access to markets, minimise the amount of OTC equity trading and laid out a definition of when a trading strategy could be defined as high-frequency trading.
MEPs have moderated some of Ferber’s suggestions in their individual amendments. These have included a fine-tuning of the HFT definition, the reintroduction of OTFs for equities, a clearer definition of when OTC trading should be allowed and a ban on access markets without pre-trade risk controls, as opposed to a complete ban of electronic access to markets.
After the MEPs have agreed a common position, the Council of the European Union, comprising member states’ financial ministers, will be required to do the same. The Council began its reading of MiFID II last month. Final adoption of MiFID II is expected in 2014.