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MiFID II’s catch-22

Under MiFID II trading venues are required to provide one of two options in order to support members’ testing efforts (RTS 7, Article 10). So exchanges can choose to offer either a realistic testing environment or a testing symbol. As testing can be terribly complicated, different views and opinions about which is better are to be heard across the market.

On the one hand, venues might argue that providing a realistic testing environment is the only feasible option, as MiFID II also requires an effective separation of testing and production environments. On the other hand, they could argue that offering a testing symbol is the only way to go because, when considering the complexity of production trading systems with all their data, parameters and settings, a proper live-like environment is prohibitively complicated.

Both arguments have their own merits, so we could be facing something of a catch-22. But fortunately financial market regulation tends to play out more like an art than a science, and so no doubt each venue will be able to offer and explain the option that best fits its own point of view.

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