The senior buy-side heads of trading reported at the 6th Annual ATF Global Summit that some of the expected impact of MiFID II had been softened due to the delayed dark cap and LEI regimes.
The buy side are reportedly already trading more LIS on MTFs and in particular conditional venues seems to have gained market share. Exchange driven auctions have also gained traction but the majority of the flow is broker preferenced and it is not interactable liquidity. The systematic internalisers (SIs)s with a Central Risk Book (CRB) are making an effort to win market share.
The spreads for large cap have narrowed and there are some indications that the minimum tick size regime has widened the spreads for small cap stock. Brokers are trying to charge a premium for any forms of scarce liquidity but the buy side face challenges within their OMS to handle different rates.
From a reporting perspective, the buy side reported third party dependencies as the major reason for trade and transaction reporting teething problems. A large proportion of buy-side firms in continental Europe made an effort to register their funds under UCITS in 2017 which helped them reduce the need for trade and transaction reporting which has been a major challenge for MiFID registered firms in the first month of MIFID II.
From a market efficiency perspective, whilst there is a wider variety of venue choices, at least there is more choice. The buy side would need the broker’s harmonisation challenges with inconsistent reporting of FIX tags to settle to get access to vastly improved granular market data. The major anticipated improvements from MiFID II is hopefully going to be a closer interaction between the buy side and sell side and better data for more informed decision making.
The next Alpha Trader Forum equities spring 2018 roadshow dates are; 15th May in Paris, 17th May in Frankfurt, 30th May in Stockholm and 5th June in London.