Alex Mcdonald, CEO of the Wholesale Markets Brokers' Association on why it is crucial that Matched Principal is maintained in Mifid II.
Agreeing on what the
shape of the European sister of the Swap Execution Facility
will be has been a long time coming. Now, as Mifid II enters
the so-called trialogue process where the co-legislators have
to agree on the final text of the regulation, we highlight one
of the many issues which needs to be more
It is positive news
that both the Council and the Parliament compromise texts
endorsed the Commission’s proposal that Organised
Trading Facilities (OTFs) are created as the trading and
reporting venue for standardised and hither-to over-the-counter
(OTC) financial instruments.
According to definitions of OTFs in each text, transactions
are permitted without prescribing any particular arranging or
execution methodology. What is specified is that OTF operators
are multilateral and do not take positions from the
transactions arranged. Therefore the current definition allows
them to discover liquidity using different transaction
methodologies, which is critical as we envisage OTFs, by way of
the nature of their wholesale participants, as liquidity
discovery venues rather than of price discovery.
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