OTF in a Box Launched

Terry Flanagan

Internalization networks to be classified as organized trading facilities under MiFID II.

Organized trading facilities (OTFs), a newly-created category under MiFID II, are leveraging technology to help meet requirements on transparency and transaction reporting.

MiFID II focuses on four areas of interest for OTFs: market structure, transparency, high-frequency trading and reporting.

“MiFID II adds previously unregulated Organized Trading Facilities (OTFs) to the MiFID framework to include evolving business models such as broker crossing networks, Per-Anders Hall-Bedman, acting CEO at Cinnober, told Markets Media.

Cinnober, a Swedish-based technology supplier, has launched an OTF-in-a-box service, TESS OTF.

TESS, which is short for TRADExpress Streamlined Services, makes the company’s marketplace technology, including matching engine and surveillance, available as a subscription service.

TESS OTF, which is built upon Cinnober’s TRADExpress Trading System and Scila Surveillance trade monitoring solution, and is designed to meet the requirements of MiFID II, the new regulatory framework for the European financial market.

It comprises a fully hosted and managed OTF system with exchange quality including a broad range of functionality add-ons to shape and extend the service. The capacity in terms of transaction volumes and throughput can easily be scaled up on demand, allowing customers to grow as business grows, the company said.

Cinnober has “had a dialogue with several European investment banks,” said Hall-Bedman. “Our offering will replace or supplement their current systems, in many cases in-house developed.”

All the regulatory requirements identified in MiFID II are readily available in TESS OTF, from best-execution routing and circuit breakers, through pre- and post-trade transparency, high-frequency trader supervision of obligations, to storing of order data, reporting on execution quality, and complete reporting to regulators, according to Cinnober.Cinnober’s flagship product, TRADExpress Trading System, is a multi-asset platform for trading with instrument structures such as equities, derivatives, fixed income and stock lending.

Among Cinnober’s customers that are utilizing the TRADExpress Trading System are Alpha Trading Systems, Burgundy, Chicago Board Options Exchange, Hong Kong Mercantile Exchange, London Metal Exchange, NYSE Liffe, Quadriserv and Stock Exchange of Thailand.

Cinnober’s value proposition is based on flexibility, which is critical as regulations come on stream, according to Hall-Bedman.

The service pricing is based on usage in terms of capacity level, asset classes and functions. The subscription fee covers both software license and services, and there are no major startup costs.

“There are a number of challenges for the trading venues targeted by MiFID II, including how to become MiFID  II compliant, within time and to an acceptable budget, while still preserve their, perhaps unique, service offering,” said Hall-Bedman.

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