New research from Greenwich Associates reveals that the majority of
European institutional investors believe that new financial market rules scheduled to take effect next month have a good chance of achieving regulators’ stated goals of increasing market transparency and further integrating Europe’s capital markets.
MiFID, which will take effect on 1 November, will introduce significant changes to Europe's regulatory framework with the goal of integrating Europe's national markets. Included in the directives are new pre- and post-trade transparency requirements and reporting requirements for equity markets, new capital requirements and other provisions intended to facilitate cross-border business.
Thirty-five percent of the institutions participating in Greenwich Associates' 2007 European equity investors study expect MiFID to increase liquidity in European equity markets, while twenty per cent expect it to reduce liquidity.
"Half the institutions we interviewed say MiFID will increase clients' ability to measure and achieve best execution, while only seventeen per cent think the rules will make it harder for clients to assess best execution," says John Colon, consultant, Greenwich Associates.
More than three-quarters of the institutions believe that MiFID will place mid-sized and regional brokers at a disadvantage, and fifty-five per cent think the new rules favour major broker-dealers.
"Our research suggests that the benefits of the new regulations will not be evenly distributed," says Jay Bennett, consultant, Greenwich Associates. "Europe's institutions expect that there will be winners, including the institutions themselves, large broker-dealers and electronic trading venues, all of which will benefit from the integration of markets and new requirements governing best execution and transparency. They also believe there will be losers, including smaller broker-dealers and exchanges," he continues.