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Alternative Market Briefing

EU moves on MiFID II, banking union

Monday, April 21, 2014

Bailey McCann, Opalesque New York:

The European Union has approved moving into the second phase of its Markets in Financial Instruments Directive (MiFID) regulation which handles market structure issues, these new rules will have implications for high frequency trending and derivatives. In addition, European banks are likely to see still more regulation under the new banking union that was approved during the same session.

Under the current agreement, new rules will enter into force in 2016. The European Securities and Markets Authority (ESMA) will release technical guidance between now and then for implementation of the new rules. As with any financial regulation, each rulemaking effort will come with a comment period which typically allows for any of the broad guidelines laid out by the European Commission at the end of last week when the changes were approved to be watered down.

Deutsche Börse-owned Eurex and IntercontinentalExchange-owned Liffe will first look at new derivatives rules which could actually make markets more competitive. MiFID II also places continued scrutiny on high frequency trading which is under parallel investigation in the US. Standardized derivative trades will have to be executed on regulated trading platforms and the EMIR clearing obligation will be extended to capture exchange traded derivatives. In addition to standardized trading there will also be new position limits and reporting requirements.

"Changes to the exemption rule......................

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