Liquidnet, the institutional equities marketplace, has submitted its response to the European Commissions (EC) public consultation on the review of the Markets in Financial Instruments Directive (MiFID).
In its comment letter to the EC on the MiFID review, Liquidnet supports the proposal for a consolidated tape, but highlighted three proposals in the consultation that would raise trading costs for institutional investors in Europe. These are the pre-trade display of actionable IOIs (indications of interest); requiring public display of stub orders (i.e. parts of block orders); and a minimum order size for reference price waiver.
For nearly a decade, Liquidnet has focused on building a truly global equities marketplace for institutional investors that is one of the safest and most efficient sources of liquidity for long-term investors, says Seth Merrin, CEO and founder of Liquidnet. As markets around the world become increasingly fragmented and open to high-frequency trading, the European Union can now seize this opportunity on behalf of the millions of small investors across Europe to assume a leading role in the drive for equity markets that are safe and efficient for all investors.
John Barker, head of international for Liquidnet, adds: Institutional investors need anonymity and the ability to trade in size in order to get the best price for their ultimate clients, individual investors with investments such as SICAVs, pensions or mutual funds. The MiFID consultation draft currently contains two major proposals that would raise costs for tens of millions of these individual investors across Europe. The proposal on actionable IOIs would prevent institutions from negotiating blocks directly with other institutions. We believe this is unintentional and should be fixed. The proposal on stub orders would also make it more difficult and expensive for institutions to trade blocks, and many institutional investors have made clear that this would raise their trading costs.
Liquidnet says it strongly supports a European consolidated tape to improve post-trade transparency, as the commission has proposed. This would eliminate the current double counting of trades by creating uniformity through a clear printing hierarchy of trades. The company envisages a core regulator-organized framework, along with additional private sector options.
Finally, Liquidnet says a consolidated quote, while less critical to institutional investors, would be a welcome step and the new regulatory authority ESMA should be tasked with creating a framework, around which differing private sector solutions could be developed.