Mifid - Secondary markets

Question 1

Mifid review/levels in secondary marekts

Answer 1

Level 1: Mifid/Mifir
L2: Commission delegated regulations (CDR)
L3: ESMA guidelines, Q&A

Question 2

Mifid II objectives and outcomes

Answer 2

Objectives: coherent regulatory approach for transacrion execution whatever trading system is used, promoting quality, market integrity and efficiency for investors. coherent regulatory approach. consideration of new trading systems to avoid loopholes etc.

Outcomes: new trading venues (OTF), level playing field and harmonisation of requirements applying to trading venues

Question 3

Trading venues definition

Answer 3

facilities in which multiple third party buying and selling interests interact in the system. SYSTEMATIC INTERNALISER SHOULD NOT BE ALLOWED TO BRING TOGETHER THIRD PARTY BUYING AND SELLING INTERESTS IN FUNCTIONALLY THE SAME WAY AS A TRADING VENUE

Question 4

Areas of potential effect from HFT

Answer 4

1) systemic risk
2) market quality (informational efficiency, volatility, liquidity)
3) market integrity (ghost liquidity: false view of real depth of trading book)

Question 5

Consequences for regulatory

Answer 5

1) HFT are IFs -> need monitoring of algos, stress tests etc.
2) Trading venues -> needdue dilligence regarding HFTs