Traders disagree over whether MiFID II has been successful, according to new research by SIX, with a combined 70 per cent of traders surveyed by the Swiss exchange believing that trading has become more transparent – a key goal of MiFID II.
Paradoxically, only 26 per cent believe that dark liquidity will shift to lit markets, highlighting the failure of a key aspect of the regulation. Traders indicate that they are also divided as to where dark liquidity on capped stocks will shift instead of lit markets, with a relatively even spread between: Block Trading/LIS dark pools – 31 per cent; Systematic Internalisers – 23 per cent; and Periodic auctions – 20 per cent
According to Tony Shaw (pictured), Director London Office, Securities & Exchanges, SIX: “This variance in responses highlights the reigning uncertainty among traders. Over time, market developments will provide more conclusive answers on the success of MiFID II.”
Reporting preoccupies the vast majority of traders as 86 per cent of the respondents cited transaction reporting (50 per cent) and best execution reporting (36 per cent) as causing the most concern under MiFID II.
Although MiFID II and regulation remain a concern, it is no longer the single biggest challenge facing traders, with the picture now far more mixed. Those citing regulation such as MiFID II as the biggest risk in 2018 fell to 46 per cent, compared with 73 per cent in 2017.
The research also revealed that an overwhelming 87 per cent of traders believe that the increased levels of volatility we saw in Q1 2018 is a trend that will continue. Interestingly, three quarters of traders stated that ETFs have contributed to this rise in volatility.
Commenting on the findings of the survey, Shaw says: “Despite the optimism of some traders, there is no consensus on whether MiFID II can be deemed a success. Our research demonstrates a large difference of opinion among market participants.”
The survey also highlighted that traders are much more positive about growth prospects for their own industry, with nearly two-thirds (62 per cent) expecting more growth within their companies in the future, compared to a mere 15 per cent one year ago.