For Immediate Release
 
 
Industry Concern for MiFID II Impact on Trading and Fixed Income Liquidity
 
 

​London, March 5th - According to a recent survey trading in Fixed Income, Derivatives and Commodities contracts is expected to diminish in profitability when these asset classes are brought within the scope of the second version of the Markets in Financial Instruments Directive (MiFID II) regulation, and liquidity in Fixed Income markets is expected to decrease.

According to the survey of individuals in senior compliance, risk and internal audit roles operating within the UK financial services sector (undertaken at Protiviti’s recent MiFID II Regulatory Seminar), a majority believes the profitability or viability of trading or using Fixed Income, Derivatives and Commodities contracts will decrease, following their inclusion within the updated MiFID.

Forty-four percent of respondents believe MiFID II will reduce the profitability or viability of trading or use of these instruments, 30% are not sure of the impact on their business, while only 13% believe new regulation will improve their viability or use. Further, 50% of respondents believe that liquidity in Fixed Income markets will be reduced, following their inclusion within MiFID II. Twenty percent of respondents believe liquidity in Fixed Income markets will increase, 25% are unsure and 5% do not believe liquidity will be affected. 

Other Key Survey Findings

  1. 83% of respondents believe the cost of increased reporting will impact the long term future of Fixed Income, Commodities and Derivatives trading
  2. Only 20% of respondents expect the new regulation will improve competition, 16% forecast lower transaction costs and 10% expect greater market efficiency
  3. ‘Transaction Reporting’ and ‘Transparency Requirements around Fixed Income’ are expected to have the biggest impact and require the most significant business changes
  4. ‘Capacity Constraint’ and ‘Regulatory Fatigue’ are the most cited risks to successful implementation of MiFID II

Commenting on the results of the survey, Bernadine Reese, Managing Director at Protiviti in London, said, “The fact that nearly 30 percent of respondents are not sure how MiFID II will impact trading in Fixed Income, Derivatives and Commodities suggests there is much work to be done to assess the business implications of this major change.”

“Three times as many delegates at our latest MiFID Regulatory Seminar predict that trading will be negatively impacted by the new regulation, rather than positively, with reporting and transparency requirements deemed the most challenging to businesses. It’s vital for market participants not only to ensure compliance with new requirements, but first and foremost to think strategically how the required changes can be leveraged to bring about business growth,” said Reese. “This is the best way to leverage work already underway and increase resource efficiency in a way that will elude those that view implementation merely as a compliance task.”

Speaking at the Protiviti event, Paul Willis, Technical Specialist – Commodities / Markets Policy Disvision, Financial Conduct Authority, said, “With no transitional arrangements currently in place to smooth market participants’ implementation of MiFID II compliance, we are urging industry to make all the preparations it can to be ready for 3 January 2017”. 

A total of 30 survey responses were returned from individuals representing a broad spectrum of the largely wholesale financial services industry and wealth management sector.  The wholesale financial services industry comprises investment and commercial banking, securities trading and investment management.  Not all responses covered every question.  Percentages used reflect the responses who answered specific questions. 

For the full set of results and to download a complimentary copy of the survey results please visit here.

For more information Please contact Bernadine Reese at beradine.reese@protiviti.co.uk or Stuart Campbell at stuart.campbell@protiviti.co.uk

 
 
 
 
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