The Economic and Monetary Committee (ECON) of the European Parliament is expected to support the planned organised trading facility (OTF) trading venue category when it tables amendments to MiFID II in July, but there is less agreement on the asset classes to which it will be applied.
Kay Swinburne MEP, shadow rapporteur for MiFID, said Thursday most political groupings represented on ECON had now accepted that the creation of the new category – as proposed in the European Commission’s draft text last October – should be enshrined.
“There is agreement that OTFs will exist, but not on for which asset classes,” she said.
Speaking at the annual convention of the Federation of European Securities Exchanges, Swinburne said only the socialist group was now implacably opposed to OTFs, while both the Alliance of Liberals and Democrats for Europe and her own European Conservatives and Reformists group are in favour of the OTF category applying to cash equities trading as well as other – currently largely OTC – markets, such as fixed income and derivatives.
The OTF category was included in the EC’s draft review of MiFID both to facilitate the migration of OTC financial instruments onto centrally-cleared exchange-like trading venues – in line with the Group of 20 requirement for reduced systemic risk in OTC derivatives – and to bring cash equity trading currently conducted in broker crossing networks (BCNs) into the MiFID regulatory framework. However, a number of groups, including exchanges, have criticised this approach to regulating OTC cash equity trading, calling instead for all trading not considered large in size to be migrated to existing trading venue categories.
Swinburne added that the inclusion of the OTF category in the European Parliament’s version of MiFID was an important step for the directive ahead of negotiations with the Council of Europe – which represents EU member states – in the so-called trialogue process that finalises the text. However, she stressed the parliament’s text would depend on how rapporteur Markus Ferber dealt with the remaining differing political groups. Ferber, a member of Germany’s Christian Social Union, has previously queried the need for the OTF category but is believed to have modified his view during the consultation undertaken by ECON. The rapporteur is responsible for guiding EU legislation through its parliamentary stages.
ECON is due to meet 9-10 July to finalise its text for MiFID. In addition to OTFs, one of the other issues causing most disagreement between MEPs has been the draft directive’s proposed rules on high-frequency trading.