MiFID II will ensure greater choice and greater transparency.
Why should derivatives markets be any different?
The derivatives trading and clearing revolution
Open access to any market, from labour and intellectual property to food and industrial goods, lies at the heart of the philosophical approach to the EU single market. Financial markets are no exception, and users will benefit when they too are opened in a fair and transparent way.
The tightly controlled world of European derivatives trading and clearing is about to undergo a revolution. That may sound dramatic, particularly compared to the title of the dryly named revolutionary agent, MiFID II, but it enshrines the principle of “open access”. That is, the ability of investors to choose where to trade and clear their products, by preventing exchanges and clearing houses from operating a “closed” silo model, tying the trading, clearing and licensing of products to a specific venue.
In the age characterised by transparency and consumer choice, we believe there can only be one answer – Open Access.
Bringing competition to the derivatives market
Today’s challenge bears a remarkable resemblance to 2007, when European exchanges enjoyed a virtual monopoly on the trading of shares. The revolution brought about by MiFID I, the EU’s landmark piece of legislation, introducing competition to equity trading, made for difficult reading for Europe’s exchanges. However, the result for customers and investors was transformational: lower trading prices, reduced spreads, faster and more resilient technology, and a fundamental rebalancing of the relationship between the providers of infrastructure and its users. That’s the power of competition.
Today, the European derivatives market finds itself in a similar position and exceptional change is just over the horizon. More open markets not only bring economic benefits to customers, they also increase transparency and safety.
In an open letter issued last summer, the vast majority of the financial services industry voiced its support for a more open model, including the world’s largest asset managers, investors, major sell-side participants and trade associations. Regulators too have voiced their opinion, identifying fair and open access as an important foundation in the building of safe and efficient markets.
And customers have spoken: fairness, safety and choice are coming to the derivatives markets.
Talk to us today about making Open Access work for you.