Euronext CEO Expects MiFID II Changes

Shanny Basar

Stéphane Boujnah, chief executive and chairman of the managing board of Euronext, expects regulators to make changes to MiFID II if the objective of increasing lit volumes is not met.

Stéphane Boujnah, Euronext

Boujnah said on the Euronext first half results call today that MiFID II, which went live in the European Union at the start of this year, had the ambitious aim of shifting volumes from over-the-counter to lit markets but this has not yet happened. The chief executive continued that one area that regulators will focus on is systematic internalisers.

MiFID II banned broker crossing networks. Instead, firms have to set up systematic internalisers in order to provide risk capital that facilitates trades, which brings regulatory obligations such as trade reporting.

“The systematic internalisers regime gave flexibility and their use is being monitored by supervisors,” he added. “Sooner or later, regulators will take a look and consider whether the current situation meets the intended framework and make secondary adjustments.”

The CFA Institute has also warned that attempts to remedy systematic internalisers to increase transparency have not worked.

Sviatoslav Rosov, PhD, director, capital markets policy EMEA at CFA Institute, said in a blog this month that the SI regime is problematic. He wrote that it is easy to design an SI with an automated quoting system that has quote feeds from various sources, including other SIs, going into an execution engine that automatically selects the most desirable execution outcome for the client order.

“By connecting to one another to create de facto multilateral trading venues, SIs could essentially recreate broker crossing networks, which MiFID II was intended to prevent,” Rosov added

The Autorité des Marchés Financier, the French financial regulator, said in its Markets and Risk Outlook at the beginning of this month that MiFID II’s objective of increased transparency is unlikely to be met given the strategies developed by market participants such as the increased use of systematic internalisers and periodic auctions.

MiFID II also aimed to encourage trading on lit venues by introducing double volume caps on trading in dark pools. However, the AMF noted that the market share of overall lit markets remained almost unchanged at 46%.


Large blocks, above a specified size, have a waiver from the double volume caps and volumes of electronic blocks on EU venues have been setting records.

Euronext Block, the exchange’s large-in-scale block trading platform set a daily trading record the month:

Rival Cboe LIS, the European block trading platform owned by US Cboe Global Markets, also  had its best day on record this month with €409m notional traded on 18 July. Total notional value traded on Cboe LIS this month was a record €6bn notional.

Cboe said in a statement that its LIS platform accounted for one with of block volume this month, according to data analytics provider big xyt.

The London Stock Exchange Group reported its first half results this week, the first for new chief executive David Schwimmer.

David Warren, chief financial officer, said on the results call that there had been a smooth transition to MiFID II environment across LSEG’s markets. He added: “Turquoise Plato Block Discovery Large in Scale value traded in the second quarter was €20bn, up 23% on €16bn in the first quarter.”

Last month Turquoise Plato Block Discover said it had its biggest trade ever of €17.33m executed on 28 June.

The AMF questioned the development of LIS trading and said some participants are waiting to aggregate enough small orders to maintain their ability to trade on dark platforms once the waiver size is reached.

The French regulator warned: “This behaviour of postponing the execution of a client order in order to reach a LIS size that bypasses the double volume cap could directly harm the execution quality of client orders and violate the best execution obligation.”

New trading platform

In Euronext’s results today Boujnah also noted that  in the second quarter of this year the exchange reached a historical milestone with the migration of its cash markets to Optiq, a new low-latency proprietary trading platform which will make it easier to launch new products, to add other exchanges to the group’s federal pan-European model and increases capacity tenfold. The move of cash equities followed the migration of fixed-income instruments to the platform in April this year.

“Optiq provides our clients with cutting-edge performance in terms of latency as well as time to market and flexibility while allowing for optimized hardware footprint,” he added.

The next steps for Optiq are the planned migration of Euronext Dublin, the move of Euronext Derivatives markets next year and the launch of an MTF for exchange-traded funds.

“Optiq will also power Euronext’s new ETF MTF as part of the Agility for Growth strategic plan,” added the exchange. “Euronext offers Optiq to other leading exchanges and venue operators; the Luxembourg Stock Exchange already benefits from Optiq and other exchanges around the world have begun Optiq migration projects.”

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