Mifid II: systematic internalisers multiply despite Commission's move

Author: Tom Young | Published: 4 Sep 2017

The European Commission’s attempts to close a loophole for systematic internalisers (SI) will not end the uncertainty surrounding the nascent regime, according to market participants. It’s also unlikely to dampen the enthusiasm for new applicants, which include high-frequency trading (HFT) firms.

An SI is a term originally used for equity products under the Markets in Financial Instruments Directive (Mifid), but one which has taken on new life as a result of its Mifid II successor. Under Mifid II, the European Securities and Markets Authority (Esma) aims to prevent banks matching client orders while simultaneously trading with those orders. Institutions wishing to continue matching flow must become a multilateral trading facility (MTF) and they can only trade with it on risk if they register as an SI.

Traditional exchanges have long-complained about the negative impact SIs could have on their ability to match trades. Trading with an SI involves...



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