Bond Traders Warn MiFID II Will Drive Business From Europe

(Bloomberg) -- Bond trading firms are making a last-minute plea to regulators, warning that unless tweaks are made to Europe’s MiFID II rules, business will flee to other regions.

The firms, which included Michael Spencer’s NEX Group Plc, London Stock Exchange Group Plc unit MTS Markets, MarketAxess Holdings Inc. and Tradeweb Markets LLC said the European Union requirements for traders’ personal data clashes with practices in Singapore, Hong Kong and New York. The group sees a migration of capital markets activity away from regulated venues as a result.

“Our fear is that the market will move quickly, and irreversibly, to more opaque and remote markets,” the firms, led by lobbying group the Electronic Debt Markets Association Europe, said in a letter to European policy makers dated Sept. 11. “A material proportion of trading volumes in our impacted markets would be incentivized to leave Europe altogether. This would be contrary to the objectives of MiFID II by driving activity off regulated venues and by making European financial markets less competitive and more opaque.”

The association urged the European Securities and Markets Authority, the regulator that sets standards across the bloc, to change guidelines about how much client data must be collected by trading venues. Specifically, the group said its concerns could be eased if non-MiFID firms trading on European venues were required to provide information at the level of the participant on a platform rather than also the participant’s underlying clients.

The group acknowledged the difficulty in altering the Markets in Financial Instruments Directive rules less than four months before the law kicks in.

“We understand that there are technical limitations in the way in which the EU systems have been built which makes it difficult to implement this recommendation, and there is an element of ‘wait and see’ in the feedback we have received from the regulators, because systems cannot be changed at this late stage,” the group said in the letter, which was addressed to ESMA.

Markus Ferber, the lead lawmaker on MiFID II in the European Parliament, said the “right incentives” must be created to fulfill the law’s goal of increasing trading on regulated marketplaces.

“The European Securities and Markets Authority should indeed examine whether changes to the guidelines that facilitate the reporting regime without limiting the possibility to monitor market abuse are possible,” Ferber said in an email. “However, I don’t see any scope for changes to the regulatory technical standards anymore.”

An ESMA spokesman declined to comment on the matter.

EDMA, formed in 2016, represents the interests of companies whose primary business is the operation of regulated electronic fixed-income multilateral trading facilities in Europe.

Bloomberg LP, the parent of Bloomberg News, provides a cash bond trading platform.

The Financial Times had reported the letter earlier.