The definitions of ‘fraction of a second’ as well as ‘discretion,’ remain unclear in the rules
The direct electronic access or direct market access provisions
that were released in the final regulatory technical standards (RTS) under Mifid II last
month have left market and legal experts with lingering questions.
The first point of doubt concerns the definition of direct
electronic access (DEA) itself.
The delegated regulation states that a person
will be considered as having DEA access where that person ‘cannot exercise discretion
regarding the exact fraction of a second of order entry and the lifetime of the
order.’ The definitions of ‘fraction of a second’ as well as ‘discretion,’
however, remain unclear.
"Direct electronic access (DEA) covers non-member
trading via another broker. For the first time, MiFID II defines a common
standard for pre-trade risk checks covering DEA and member trading. There is,
however, still some uncertainty over the definition such as the
interpretation of the term ‘fraction of a second.’ While its interpretation
might be debatable, its relevance is fully acknowledged, because without it
even a retail investor could fall within the DEA category,” Christian Voigt,
senior regulatory adviser at Fidessa, told FOW.
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