Our privacy policy describes how Fidessa uses cookies on our website. If you continue using our website, you are consenting to our use of cookies. OK

So that’s nice and clear…

According to a few reports I read this week we should all be thankful to the European Commission for clearing up the “loophole” that existed in the current Systematic Internaliser regime. Well that’s a relief – except for two small points – first they haven’t and second they seem to have missed the whole point. A commission official has clarified that SIs will not be allowed to “regularly” engage in “pre-arranged matching of trades via de facto riskless back-to-back transactions”. So what does “regularly” mean? Once a second, a day, a month? Presumably this will be interpreted differently according to the velocity of a stock and/or its underlying liquidity. And, bear in mind, the SI regime stretches over OTC derivatives transactions too which are even broader in their trading scope – so, no chance for confusion there then. Also, what is their definition of “riskless”? Holding risk depends upon the likelihood of prices moving against you, which again varies hugely between different stocks and instrument types. So the only way I could absolutely prove that I was really taking on risk would be to hold onto a position (even if I had the other side) until the price did indeed move against me. Again, hardly a satisfactory outcome for anybody.

It would be great if ESMA understood that simply declaring lit good and dark bad is just too much of an oversimplification and that market forces are just that – the forces that shape and dictate how markets operate. But don’t worry, the European Parliament has got another 3 months to scrutinise the issue. Can’t wait…

Leave a comment

Copyright © 2017 Fidessa group plc. All rights reserved.

The information contained within this website is provided for informational purposes only. Fidessa will use reasonable care to ensure that information is accurate at the time it is made available, and for the duration that it remains on the site. The information may be changed by Fidessa at any time without notice. We also reserve the right to close the website at any time. No representation or warranty, expressed or implied, is given on behalf of Fidessa or any of its respective directors, employees, agents, or advisers as to the accuracy or completeness of the information or opinions contained herein or its suitability for any purpose and, save in the case of fraud, all liability for direct, indirect, special, consequential or other loss or damages of whatever kind that may arise from use of the website is hereby excluded to the fullest extent permitted by law. Any decisions you make based on the information in this website are your sole responsibility and information on the website should not be relied upon in connection with any investment decision.

The copyright of this website belongs to Fidessa. All other intellectual property rights are reserved.

Fragulator® is a registered trademark of Fidessa group plc.

Reproduction or redistribution of this information is prohibited except with written permission from Fidessa.