Fixed income venues warn MiFID will “drive business out of EU”

Letter to ESMA from major fixed income venues claims transparency rules will drive non-MiFID firms onto unregulated venues in Asia and North America.

MiFID II will drive business off of venues and out of Europe, diminishing overall regulatory oversight, according to a letter to the European Securities and Markets Authority from several major EU debt market trading venues.

The Electronic Debt Markets Association (EDMA Europe) said current regulatory technical standards (RTS) “risk pushing many important market participants to trade outside of regulation venues with the EEA (European Economic Area), or simply to move trading outside of the EEA altogether; diminishing the strength and depth of the European regulated trading venues.”

In its letter addressed to ESMA chairman Steven Maijoor, EDMA highlights RTS 22 and 24, which state non-MiFID firms will need to provide regulated venues with personal data specifying who is executing a trade and who is making the investment decision. ESMA said this creates significant operational, compliance and data protection challenges for choosing to trade on an EU regulated venue, with some jurisdictions having local laws that prohibit firms from complying with this.

As there is no regulatory requirement to trade fixed income on regulated venues, EDMA believes this could push more firms to use non-EEA venues in locations such as Singapore, Hong Kong and New York.

“As a consequence, an overly zealous application of these requirements, and the technical impediments to finding a more flexible solution and a level playing field when compared with bilateral trading within the EEA, is incentivising the opposite behaviour to that intended by the regulation,” the letter reads.

It suggests that ESMA should take action to reduce the requirements for non-MiFID firms, suggesting they should be equivalent to the level of a platform participant, which would mean they do not need to extend requirements to underlying clients and which would reduce the incentive to trade outside of the EEA.

The letter was signed by EDMA Europe secretary general, David Bullen, MarketAxess CEO Rick McVey, MTS Markets CEO Fabrizio Testa, NEX Group CEO Michael Spencer and Tradeweb Markets CEO Lee Olesky.