With the new technology in place for the World Cup in Brazil, long and unsettled disputes about whether the ball was in or out are a thing of the past. Discussing the scope of MiFID II with some market participants, I really wish we had an equivalent technology
in financial markets.
MiFID II states that certain firms dealing on their own account are exempt from MiFID II, while explicitly excluding DMA users from this exemption (MiFID II
Article 2(1)(d)). Does this ‘exemption from the exemption’ imply that all DMA users across the globe fall within the scope of MiFID II? Thinking extraterritoriality, this would force a large number of non-EU trading firms active in EU markets to get registered
under MiFID II – or perhaps go back to good old voice trading.
One possible argument against that interpretation can be found in Article 1 (Scope). Here it says that only third-country firms working through the establishment
of a branch in the Union are in scope of MiFID II. To me, logic suggests that I can only be exempt from something if I’m in scope in the first place. Since non-EU DMA users without an EU branch are not part of MiFID II to begin with, they shouldn’t be caught
later by the exemptions of the exemptions. Whether this is the last word regarding DMA and MiFID scope remains to be seen. Certainly an interesting point to follow and one that will undoubtedly test the regulators’ refereeing skills.