Broker-dealers trading on their own accounts will need to spend at least $22 million each to comply with the European Union's Markets in Financial Instruments Directive (MiFID), according to research from TowerGroup.
MiFID makes it mandatory for a sell-side firm to publicly state its prices for equities traded on its own book, if the firm is a 'systematic internaliser'.
TowerGroup believes that the typical broker-dealer meeting this classification will need to spend at least $22 million to comply with MiFID, with half of that spending on technologies including: algorithmic trading; workflow; business process outsourcing; market connectivity; FIX Protocol; service-oriented architectures; and data warehousing.
Systematic internalisers were initially defined as companies that traded more than 15% of their shares off their own account. This would have meant compliance costs of around $10 billion because there would have been at least 400 systematic internalisers in the European Union.
However, the European Commission dropped the 15% rule in early September. As a result, the compliance costs of MiFID for European securities firms have reduced significantly to a total spending of $1 billion, estimates TowerGroup.