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Alternative Market Briefing

Where MIFID II is wrong on transaction fees with detrimental consequences for investors

Tuesday, November 14, 2017

Komfie Manalo, Opalesque Asia:

Harold de Boer, Managing Director, Member of Management Committee and Member of Board of Directors at Transtrend, believes that the fixation on costs has gone too far, particularly the European Union's imposed MiFID II which is set for implementation on January 3, 2018.

De Boer told participants of the latest Opalesque 2017 Netherlands Roundtable that while he believes that the transparency required by MiFID II is a good idea for market players, it will have detrimental consequences for investors because it has the potential to disrupt the markets.

He said, "In MiFID II, investment managers are obligated to report on transaction costs. These costs include implementation costs, in principle to be calculated in a manner that has been precisely defined in another piece of EU regulation (PRIIPs). Such transparency is in itself a good idea, one could argue. Until you realize what effect this specific calculation will have when markets are disrupted."

"Take a situation like the flash crash in May 2010, with stocks trading way below their fair value. Some investment managers decided to sell in such an already heavily undervalued market, others decided to buy. One might hope that regulation stimulates the latter. But this regulation does exactly the opposite. Investment managers who decide to buy......................

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