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MiFID & EU Markets what is next ECMI – London Stock Exchange

MiFID & EU Markets what is next ECMI – London Stock Exchange. Brian Scott-Quinn – ICMA Centre BSQ1@icmacentre.ac.uk 1 st February 2010. The New Business Models success depends on meeting a new market need. London has never had a concentration rule

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MiFID & EU Markets what is next ECMI – London Stock Exchange

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  1. MiFID & EU Marketswhat is nextECMI – London Stock Exchange Brian Scott-Quinn – ICMA Centre BSQ1@icmacentre.ac.uk 1st February 2010

  2. The New Business Modelssuccess depends on meeting a new market need • London has never had a concentration rule • London had LSE competitor – Tradepoint 1993 • Failed – did not address a new market need • Chi-x came onto scene at time of change • Cheap new systems • Demand from algorithmic traders • Less capital being committed by traditional market markers? • Darkpools a response to new market need • Institutions finding average market size on LSE falling

  3. Background to MiFID • THREE OBJECTIVES + LISBON 2000 SUMMIT AIM • Establishing a single market in wholesale financial services • Making retail markets open and secure • Strengthening the rules on prudential supervision • “EU to become the most competitive and dynamic knowledge-based economy in the world capable of sustainable economic growth with more and better jobs and greater social cohesion”

  4. Some MiFID issues • Can we distinguish between Investment Firms and Regulated Markets (RM)/ Mulilateral Trading Facilities (MTFs) • Both operate crossing networks/ dark pools but under different regulatory frameworks • Should they be the same? Can we distinguish • a broker/dealer: providing a discretionary service • An RM/MTF simply providing a platform • Do we need to re-examine the MiFID pre-trade transparency waiver?

  5. The new world • High frequency trading • Electronic market making • Hedge fund algorithmic trading • Dark pools • Lack of dealer capital due to banking crisis • Need for ‘a vibrant capital market to help EU achieve its Lisbon goal? Does MiFID have a role here?

  6. Macro issues • Is MiFID only relevant to trading large company stocks • Would bond market pre-trade transparency help • Will the new Paris Euro bond market and the new LSE retail sterling bond market help • Will MiFID help smaller companies raise finance when banks won’t lend • With up to 60% of trades now algorithmic, does this help the economy – does it give liquidity to others • WHAT COMPANY WANTS SHAREHOLDERS FOR THE BLINK OF AN ALORITHM

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