11 December 2017
visit www.aciworldwide.com

Firms stop work on MiFID in face of FSA best execution proposals

26 July 2006  |  11117 views  |  0 London - Big Ben

Many firms have stopped work on planning for the implementation of the Markets in Financial Instruments Directive (MiFID) because of practical concerns over proposals from the Financial Services Authority (FSA) for the possible introduction of price benchmarks, says the London Investment Banking Association (Liba).

The association has added its voice to the criticism mounting against the FSA's proposals and argues that the benchmark proposal is "distracting scarce resources from the essential task of implementing Mifid on time".

The proposals were outlined in a FSA discussion paper released two months ago which outlined an additional option for providing best execution in dealer markets, based on the use of benchmarks.

Liba goes as far as saying that the proposed transparency regime, including calls for the disclosure of firms' internal risk models, could eventually drive business out of London.

The association says: "If an agency market were to be imposed in the UK by means of over-regulation in this way, there would be a risk that the market would move 'offshore' just as the Eurobond market originally developed in London in response to changes to tax law in the US."

The benchmarking proposal could also create a dysfunctional market structure, says Liba. By promoting the use of e-trading systems to obtain the price data required for delivering and monitoring best execution, the proposal fails to recognise the importance of a voice market in the price formation process. This could lead to a distortion in the market in favour of dealing via an electronic "request for quote" model in an MTF market, which would not be required to deliver best execution under MiFID.

The measures would also increase the cost of data capture and would require major changes to data systems and storage. Liba says firms would have to build new systems for capturing data for external referencing including - in the dealer markers - data from rival firms and from trading platforms and voice brokers with whom they have no relationship.

Liba says the bechmarking proposal would be "unworkable and unwarranted", could damage the competitiveness of the dealer markets and would be inconsistent with MiFID itself.

Earlier this month the International Capital Market Association (Icma), the International Swaps and Derivatives Association (Isda) and The Bond Market Association (TBMA) raised their concerns in response to the FSA proposals and warned that the imposition of benchmarking would be expensive to implement in practice and could potentially lead to withdrawal of liquidity.

Read the full LIBA response:» Download the document now 118.1 kb (Adobe Acrobat Document)

Comments: (0)

Comment on this story (membership required)

Finextra news in your inbox

For Finextra's free daily newsletter, breaking news flashes and weekly jobs board: sign up now

Related stories

Industry groups hit out at FSA best execution proposals

Industry groups hit out at FSA best execution proposals

17 July 2006  |  7241 views  |  0 comments
FSA cautions against extending MiFID to bond markets

FSA cautions against extending MiFID to bond markets

05 July 2006  |  10068 views  |  0 comments
McCreevy urges firms to prepare for MiFID

McCreevy urges firms to prepare for MiFID

27 June 2006  |  7158 views  |  0 comments
Financial firms unprepared for MiFID - study

Financial firms unprepared for MiFID - study

10 April 2006  |  7649 views  |  0 comments
MiFID tech group spins off

MiFID tech group spins off

06 April 2006  |  10468 views  |  0 comments
MiFID swallowing IT budgets

MiFID swallowing IT budgets

07 March 2006  |  12092 views  |  0 comments
MiFID price tag estimated at £1 billion for UK firms

MiFID price tag estimated at £1 billion for UK firms

07 February 2006  |  10164 views  |  0 comments

Related company news

 

Related blogs

Create a blog about this story (membership required)
visit www.response.ncr.comvisit www.atos.netvisit www.aciworldwide.com

Who is commenting?

Top topics

Most viewed Most shared
Revolut lets customers buy Bitcoin, Litecoin and EthereumRevolut lets customers buy Bitcoin, Liteco...
18349 views comments | 26 tweets | 22 linkedin
Saxo Bank's 'Outrageous Prediction': Bitcoin to peak at $60k next year before spectacular crashSaxo Bank's 'Outrageous Prediction': Bitco...
11255 views comments | 7 tweets | 7 linkedin
Deutsche Bank paper hails 'huge' blockchain potentialDeutsche Bank paper hails 'huge' blockchai...
7493 views comments | 14 tweets | 21 linkedin
Santander UK poaches Barclays innovation chief Michael HarteSantander UK poaches Barclays innovation c...
6564 views comments | 8 tweets | 17 linkedin
Barclays, First Direct and Nationwide join FCA sandbox cohortBarclays, First Direct and Nationwide join...
5967 views comments | 5 tweets | 12 linkedin

Featured job

Competitive base, double ote, benefits
London, UK

Find your next job