In a report which assesses the impact of MiFID on the functioning of equity secondary markets, CESR says the introduction of the Directive has thrown up a new set of challenges relating to pre- and post-trade transparency, liquidity and data fragmentation, and competition between new entrants and incumbent exchanges.

CESR notes that while the increased competition between trading venues has resulted in downward pressures on direct execution costs, this reduction in prices has been largely offset by increased spending on technology to cope with market fragmentation and a general widening of bid-offer spreads as a result of volatile market conditions. The findings also indicate concerns by some market participants that fee reductions by trading platforms have not been passed on entirely by trading participants to investors.

Market participants have also expressed concerns over a number of pre-trade transparency issues ranging from interpretation issues, to potentially undesirable impacts on innovation and an unlevel playing field between various trade execution venues. CESR has also noted industry concerns about the fragmentation of market data and the need for better quality of post-trade data and a consolidated set of market data.

Introducing the report, Jean-Paul Servais, chair of the Belgian Commission Bancaire, Financière et des Assurances (CBFA), states: "Despite the difficult market conditions of the past 19 months, MiFID has created a new dynamism and increased competition into equity secondary markets. The changes will certainly continue, and CESR stands ready to further analyse these changes and find solutions to any challenges arising."

He adds that CESR has already started preparing a similar report on MiFID's impact on the over-the-counter markets, which is expected to be finalised during the first quarter of 2010.

This is likely to lead to further upheavals, as Europe follows the US lead in enforcing more transparency in the OTC arena.

Read the full CESR report: