Concerns over proposed RFQ protocols and measures to prevent another Flash Crash have topped grumbles in the wake of the final report of the Markets in Financial Instruments Regulations II (MiFID II), published yesterday.
The 403-page report, triggered fears over how the new rules may ultimately increase costs for investors and lead to greater, unchecked, automation.
In a statement, the Investment Association said it had concerns over the proposed protocols on Request For Quote (RFQ) operators.
It said: “If they have to publicly disclose the individual bids and offers provided by the brokers, the quotes investors receive will have to price in higher market risk and therefore, will increase transaction costs.
“Moreover, these new rules will make it easier for buy-side orders to be front run by proprietary traders operating predatory trading strategies.”
Technologists, meanwhile, were focussing on ESMA’s decision to opt for a kill-switch for trading entities.
Guy Warren, chief executive officer at ITRS, said that while nobody wants to see a repeat scenario of the ‘Flash Crash’, the implementation of a real-time human kill switch is unrealistic.
He explained: “People aren’t quick enough to spot and stop a flash crash. This will probably mean an automatic system that holds a trade outside normal parameters until a human trader can either pull it or push it through.
“This means real-time is the real focus of the technical standards. You can’t stop a flash crash if that system is operating with high latency.”