An “overly zealous application” of new European trading rules could drive away fixed income business and worried overseas dealers, the heads of four of the continent’s largest electronic debt trading venues have warned.
Chief executives of MarketAxess, Nex Group, MTS and Tradeweb urged European policymakers to make late tweaks to new Mifid II guidelines and prevent up to a fifth of the €400bn-a-day bond business moving to other markets around the world, they estimated.
The call — in a letter circulated to Brussels, key parliamentarians and the pan-European regulator — said Mifid rules to be introduced in January were helping to incentivise some clients to look elsewhere to trade.
The letter was organised by the European Debt Markets Association, a new lobby group for the industry, and was signed by MarketAxess’s Rick McVey, Nex’s Michael Spencer, Tradeweb’s Lee Olesky and Fabrizio Testa of MTS, which is owned by the London Stock Exchange Group.
The venues collectively dominate European government debt and corporate debt trading.
Their intervention comes less than four months before the introduction of the new rules, known as Mifid II, that push for more transparency in off-exchange markets such as fixed income and foreign exchange, and toughened reporting standards.
Although Mifid was seven years in the making, many institutions in the US and Asia have only belatedly woken up to the scope of the new rules, which will put greater emphasis on institutions to provide critical data, such as a trader’s social security number or passport, when trading on European markets.
Some Asian institutions are resisting, in part because in certain countries the supply of personal information breaks local privacy laws.
Under the new European laws, responsibility for recording and checking the data will fall to the regulated trading venues. Other trade associations are planning to set out their concerns to Brussels in coming weeks.
The EDMA’s letter points out that, under Mifid, there is no requirement to trade fixed income products on a regulated venue; nor are there comparable data collection rules when a non-Mifid firm trades over-the-counter in Singapore, Hong Kong or New York.
“Faced with a choice . . . these firms are being incentivised to trade over-the-counter or outside of Europe; thereby beyond the reach of European regulators,” it warned. “Our fear is that the market will move quickly, and irreversibly, to more opaque and remote markets.”
The EDMA suggested one workaround would be allowing affected institutions to supply the same amount of information as a user of the trading venue.
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