It’s accepted as all but a given that European bond traders, order handlers, and execution venues will soon have to play by a new set of rules. By and large, market participants have moved on from fighting the developing framework of rules to working with regulators to ensure a say in the final outcome.

The pertinent pieces of regulation are European Market Infrastructure Regulation, which applies to derivatives, and Markets in Financial Instruments Directive, which addresses market structure. The broad objective of increased transparency is shared by U.S. regulators, but the specific details and means of how to achieve that are shaping up differently.

“Beyond the level of detail there is at the moment on MiFID 1, what will be absolutely key will be the calibration included in Level 2,” said Angela Fenwick, head of retail hub at Banca IMI in Milan. “So when the consultation opens in 2014, I expect the market to be extremely active because details like transparency levels and size thresholds will make a huge difference. The market is preparing itself for deep discussions of Level 2 detail.”

“Emir has within it the clearing part of derivatives, but the trading piece for all derivatives and fixed income is in MiFID II,” said Fenwick, who will speak at Markets Media’s Fixed-Income Trading and Investing Summit in New York on May 14. “That is specific to European markets, the specific regulatory focus on fixed income that is in MiFID II.”

Continued Fenwick, “what that brings is transparency to the fixed-income market, shifting the focus from the OTC space to a marketplace. Once we’ve established that, the marketplaces envisaged are regulated markets, multilateral trading facilities (MTFs), and organized trading facilities (OTFs), which at the moment they look very much like Swap Execution Facilities (SEFs).”

Trading venues that may be headed for marginalization include systematic internalizers and the over-the-counter space. “This is the landscape that is beginning to come out of the regulators,” Fenwick said.

“MiFID is in the process of being drawn up — we expect to see a first-voted Level 1 version at end-of-year. Consultation on Level 2 will be in 2014, with implementation in 2015,” she continued. “This sounds very far away, but it isn’t because of the deep impact it has on the industry. The effect is a shift of OTC to the regulated space.”