Leading MEPs have called into question a number of proposals put forward by Markus Ferber, the German MEP steering MiFID and MiFIR through the European Parliament.
Venue categorisation, algorithmic trading, better organisation of markets and investor protection emerged as the key issues for the Economic and Monetary Affairs Committee yesterday as it met to discuss reforms to European financial regulation.
Ferber wants to reduce OTC trading as much as possible and has proposed an amendment to MiFIR that practically shoehorns all over-the-counter equity trading into systematic internalisers. Such a proposal throws the future of broker crossing networks (BCNs) into doubt.
But British MEP Kay Swinburne Thursday said there was a place for BCNs and the facilities should provide a regulated space for OTC transactions as well as for bespoke derivative contracts.
Ferber’s proposals for article 13 of MiFIR demand any trading in stocks, depository receipts or exchange-traded funds not executed on a regulated market or multilateral trading facility must be done through a systematic internaliser “unless the transaction involves the primary issuance of the instrument”.
“The situation in financial markets has changed due to technical progress, complex new trading strategies and the arrival of new market participants. There are gaps that have to be closed, because unregulated activities must not take place,” said Ferber.
Ferber has also held ground on his tough stance against algorithmic trading, continuing to tar it with the same brush as high-frequency trading and reiterating that he believed the Commission proposal did not go far enough.
According to Feber, all trading venues should have “proper” circuit breakers in place as well as a fee structure that includes higher fees for excessive order cancellations. He further proposed all orders should be valid for at least 500 milliseconds.
But many MEPs have rejected the ‘millisecond rule’ as hard to implement, doubting it could affect high-frequency trading behaviour.
The committee’s current draft forms the basis for formulating the committee’s official position in negotiations with Member States to update MiFID.
All amendments to Ferber’s rapport must be tabled by 10 May and the draft will be put to a committee vote in early July.