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According to TABB’s senior research analyst Rebecca Healey in London, despite the capital markets industry’s best efforts, the European Commission is continuing to press ahead with the Council’s recommendation of the 4% and 8% volume caps for dark pool trading, as well as price improvement at the mid-point.
They cite that their main objective is to increase transparency, but as TABB’s Healey sees it, these proposals have the potential to inadvertently create greater opacity as well as seriously impact institutional investors ability to execute order flow.
In fact, as TABB has learned through soon-to-be published research, only 14% of institutional investors do not have concerns regarding the introduction of the volume cap proposals.
Commission members perceive that the introduction of this regulation will not lead to a disruption of trading despite the fact that if an individual cap in an instrument is breached, the national competent authority which authorises the use of this waiver will be obliged to suspend it for a period of 6 months.
Again, to us at TABB, Healey explains, it seems ironic that at time when the buy side are investing time and resources to ensure they are able to deliver best execution for their clients, regulators seem determined to restrict their ability to achieve this.
What’s more, the increased usage of FIX Protocol tagging, venue analysis and TCA allows greater post-trade transparency, which provides the correct level of pre-trade transparency without negatively impacting the institutional trader in the process, ultimately offering the buy side improved choice in venue selection.
It is also worth noting, Healey says, that the IMA today, November 14, also issued their response (attached) to these proposals, citing buy-side concerns regarding these latest proposals .
The IMA is calling for:
- Removal of the double volume cap
- Mandating use of the FIX Protocol tags
- Harmonised data standards and a European consolidated tape
- The ability to adapt and react as MiFIR/D come into force
