The London Stock Exchange has started a detailed consultation on the services it plans to offer member firms to assist their compliance with the EU’s Markets in Financial Instruments Directive.
The UK stockmarket operator says pre-trade transparency requirements will be met through the extension of market-maker quoting facilities across the full range of EU securities, while post-trade transparency requirements will be met through enhancements to the Exchange’s existing trade reporting services.
The LSE plans to take advantage of the roll-out of its new TradeEelect platform to fight off competition for business from a slew of upstart operators and bank-backed networks lining up to take advantage of the new regulatory regime, which is slated to begin in November 2007.
While US exchange Nasdaq played up the threat to London's position from MiFID during its recent takeover bid, Martin Graham, director of markets at the London Stock Exchange, believes the UK market will thrive under the rule changes.
"The Directive mirrors the open architecture and competitive environment in which London and the London Stock Exchange have grown," he says. "With new market leading technology, an enhanced suite of trading services and an attractive new tariff structure, we look forward to working with our clients throughout Europe and build on London's leading role in market development."
To this end, the Exchange has released a consultation document outlining its strategy for MiFID.
Changes include the introduction of a new market-making function on the order book for firms undertaking internalisation to advertise their prices to the market and trade via the Exchange, and a new European Quoting Service for firms to advertise prices in non-UK securities. Small cap and fledgeling stocks excluded from the order book will also be provided for through the new SETSqx service, which will enable firms to meet the MiFID requirement to display unfulfilled client limit orders by providing a facility to submit limit orders executable through periodic auctions, alongside non-electronically executable market maker quotes.
The Exchange believes the provision for on-Exchange trades will remove the temptation for firms to set up as competitive systematic internalisers under the rule changes.
Much like its continental competitors, the LSE will also extend its UK trade reporting service to incorporate both on-Exchange and OTC trades in all EU securities.
Facilities for data and best execution analysis include a new service channel for off-book trades only, covering existing UK, International and European off-book trade reports and the provision of two new best execution services through Proquote, which will provide information on execution on other UK trading venues and also transaction cost analysis.