ECON confirms plan to limit OTFs to non-equities
The MEP leading the European Parliament’s
Economic and Monetary Affairs Committee's review of MiFID has tabled an amendment
limiting the organised trading facility (OTF) to non-equity instruments only.
The new category of trading venue was first proposed by the European Commission in its first draft of MiFID II published
last October and was largely intended to capture broker crossing networks (BCNs),
which were not captured under the first version of MiFID, and new markets for
trading OTC derivatives.
However Markus Ferber MEP, who is the
rapporteur for the European Parliament's reading of MiFID II, has repeatedly questioned the need
for an extra venue category and has proposed that BCNs for equities should fit
under existing classifications.
“The main difference between regulated
markets and multilateral trading facilities on the one hand and OTFs on the
other hand is that for OTFs there is a degree of discretion over how a
transaction should be executed,” wrote Ferber in an explanatory statement
accompany the amendments. “Your rapporteur questions whether the creation of a
new category is the right way to capture organised venues which are not caught
by the already existing categories.”
Ferber added that he “regrets that the Commission did not take on board one of the
main issues of the Parliament’s resolution” from the own-initiative paper
published by fellow MEP Kay Swinburne, which supported the repositioning
of BCNs into existing venue structures.
Following an admission by Ferber to
theTRADEnews.com last month that he would seek to limit the asset classes
covered by an OTF, buy- and sell-side firms expressed their dissatisfaction,
claiming that forcing BCNs into existing venue structures would reduce
execution quality. But trade body the Federation of European Securities
Exchanges has backed the MEP’s plan, claiming the ability for OTFs to
discriminate on how they match orders would impact market fairness.
Ferber will now hold a meeting, currently
scheduled for the end of April, with other members of the Economic and Monetary Affairs Committee to discuss the amendments that
he has proposed. MiFID II is due to come into force in 2014 at the earliest.