Opalesque Industry Update - Greenwich Associates' latest research shows that only 6% of the buy-side respondents to a new Greenwich Market Pulse believe that institutional investors have had a meaningful influence on the legislative process that is working to produce new MiFID II rules.|
According to the study of 103 institutional investors by Greenwich Associates completed mid-October, only 11% of respondents thought that sufficient consideration was being given to the needs of pension funds and other beneficiaries of long-term institutional investment in the legislative process surrounding MiFID II / MiFIR. Equally concerning is that 70% of respondents thought institutional investors have had little or no influence in the process, with only 6% expressing the belief that the buy-side has had a “significant” or even “modest” influence.
Investors approached in the study were divided on whether the broker community had been influential in the process, with 43% saying they had little or no influence and 38% believing that the sell side had modest or significant influence. In contrast, the Greenwich Market Pulse reported that 70% of respondents thought that European stock exchanges had a modest or significant influence on the direction of MiFID II regulations. Remarkably, 68% of respondents said that stock exchanges had a greater influence on the regulations than the regulators themselves.
At the center of the ongoing MiFID II / MiFIR negotiations are proposed rules around areas such as high-frequency trading, tick sizes, the ability to access broker crossing networks, and the availability and cost of post-trade market data. While these subjects are technical in nature, they also have political ramifications that are not lost on any of the regulators and policy makers.
“There is no doubt regulators are being cautious and want to ensure every possible avenue of excess risk-taking is looked at very carefully. Balancing that with institutional investors’ aspirations remain a challenge,” said Greenwich Associates analyst Kevin Kozlowski.
Buy-Side Expresses Concerns About OTFs
The response from the buy-side community is clear on this issue. Sixty-four percent of the institutional investors studied by Greenwich Associates said that their ability to execute in dark pools or crossing networks would be negatively impacted, while only 11% thought the rules would have a positive impact in this area. Without the ability to trade large blocks with brokers, there is a concern among the buy side that it will be much harder to conduct business efficiently. Seventy-four percent of respondents said that access to traditional over-the-counter services, such as capital commitment and block crossing, would be negatively impacted by the proposals. Only 4% said that the proposed rules would be helpful.
New Rules Could Lessen Access to and Increase Cost of Pre- and Post-Trade Data
Divergent Views on Impact of Minimum Tick Size