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MiFID II, opportunity or challenge

As the last one hundred days of life before MiFID II becomes the new regulatory environment tick by, the level of stress and anxiety correspondingly increases. Let’s just remind ourselves, MiFID II is one year delayed already, so why all the fuss?

Like any new environment, adapting to it is both a physical change and a state of mind. The present state of mind for dealers, brokers, buy-sides, platforms and industry associations is that MiFID II is the biggest challenge facing them in living history. Worse even than the meltdown of the financial crisis ten years ago.

Well, here is an alternative view. MiFID II can also be an opportunity, but only for those who adopt a positive attitude that understand and appreciates the changes MiFID II brings.

In essence MiFID II is about enforcing the availability of pre and post-trade data in a highly structured format upon a community who have in the past resisted all attempts to even acknowledge its’ existence or value. Interestingly, the benefits from an opportunistic outlook do not just apply to those affected by MiFID II. They equally apply to anyone in the OTC Fixed Income market, whether you are in the EU, US or Asia.

However, even if you have an opportunistic attitude, those benefits only become apparent and accessible with the assistance of two advanced technology solutions. Solutions that combine the “access all areas” advantages of connectivity and the productivity of normalising complex data into one intelligent display.

It should come as no surprise that these two solutions emanate from other asset classes like Equities and FX under regulations like MiFID I in 2007. Equities in particular have highly advanced connectivity between users and venues where competitive advantage is measured in milliseconds.

Latency is unlikely to be a part of the OTC Fixed Income markets any time soon, but connectivity and normalising data most definitely are. Those participants who set out to simply demonstrate they have implemented and met regulatory technical standards (RTS) are not only missing the point, they are missing the whole opportunity of the new market structure environment and will, as has been seen in Equities, suffer an execution and performance disadvantage against those who embrace solutions to address MiFID II.

Starting with connectivity, it is quite clear that every participant knows every participant they trade with, but not every participant is connected to every participant they trade with. That is like the early days of cell phones where users of different networks could not call each other. Unimaginable now? Well early cell phones could not process data either. Yes, now you get it. Look how those devices have evolved as data has become not only universally accessible, but universally digestible.

Imagine life without your phone and you have a snapshot of the present Fixed Income market.

Although the FIX protocol has provided a platform for data transmission, its’ many iterations make it a costly minefield to participate in and most firms are extremely limited in their resources, budget and time to connect anything more than the minimum requirements. Fortunately the first one of these solutions is TS FastPass, exclusively offered by TS to connect anyone to anyone using FIX, no matter what version they are using. Point to point, API or cross-connectors, TS has the depth and width of 18 years of FIX expertise, data normalisation, nine data centres and follow the sun support.

TS FastPass is further enhanced by total neutrality to brokers, dealers, venues and OMSs meaning it connects you to where you need to be at a very effective implementation time and cost.

The second solution is the TradeSmart EMS that drives best execution and TCA to dramatically improve execution performance for both buy-side and sell-side whilst also meeting MiFID II data capture and reporting obligations.

Most firms run a version of an EMS and TCA, but it is often handicapped by a lack of broker, dealer, venue and OMS neutrality, thus dramatically reducing choice, quality and volume of valuable data.

This is why MiFID II is a challenge to most participants rather than an opportunity. Their lack of connectivity restricts their quality and volume of valuable data. That directly impacts their execution performance and blunts their competitive edge.

The combination of TS FastPass connectivity and TradeSmart EMS turns MiFID II from a challenge into an opportunity.

Already some of the smartest and forward thinking brokers, dealers, buy-sides and OMSs are installing TS FastPass and TradeSmart into their trading infrastructure to not only comply, but more importantly, thrive in the new world data driven activity.

  • Paul Reynolds @ TradingScreen

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