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Setting the Institutional and Regulatory Framework for Trading Platforms: Does the MiFID definition of OTF make sense? ECMI Research Report No. 8/2012, April 2012

Valiante, Diego. (2012) Setting the Institutional and Regulatory Framework for Trading Platforms: Does the MiFID definition of OTF make sense? ECMI Research Report No. 8/2012, April 2012. UNSPECIFIED.

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    Abstract

    As discussions around the revision of MiFID are heating up, this paper tries to set a new regulatory and institutional framework for multilateral and bilateral execution mechanisms of complex financial instruments, such as over-the-counter derivatives and fixed income products. The author argues that the current MiFID framework is equipped to capture a great deal of multilateral derivatives and fixed income trading, but the Directive fails to provide a complete definition of bilateral execution mechanisms and has narrowed it to mainly own account trading (e.g. systematic internaliser). A key proposal of this paper is to consider own account trading, agency trades (discretionary matching) and principal trading as pure bilateral execution services to be classified under a broader definition of systematic internaliser (with revised obligations), subject then to the application of conduct of business rules (e.g. conflicts of interests management procedures) and a best execution regime. MTF would then be adapted to explicitly state that multilateral systems are not just those bringing together multiple interests from third parties, but those systems bringing together interests through ‘non-discretionary’ services, vis-à-vis membership, admission of products to trading, and matching of interests. Finally, despite the claim that OTF and SEF would be equivalent categories, US and EU regulators are defining diverging regulations for these venues. There are at least four important areas in which the SEF definitions do not match the proposed EU rules for OTFs.

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    Item Type: Other
    Subjects for non-EU documents: EU policies and themes > Policies & related activities > regulations/regulatory policies
    EU policies and themes > Policies & related activities > economic and financial affairs > Single Market > capital, goods, services, workers
    Subjects for EU documents: UNSPECIFIED
    EU Series: UNSPECIFIED
    ["eprint_fieldname_eusries" not defined]: UNSPECIFIED
    EU Annual Reports: UNSPECIFIED
    Series: Series > Centre for European Policy Studies (Brussels) > ECMI Research Reports
    Depositing User: Phil Wilkin
    Official EU Document: No
    Language: English
    Date Deposited: 10 Apr 2012 11:25
    Number of Pages: 16
    Last Modified: 10 Apr 2012 11:25
    URI: http://aei.pitt.edu/id/eprint/34483

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