In less than two months Europe's stock exchange
technology will be put to the test when theMarkets in Financial Instruments Directive(MiFID) brings new requirements for investment firms,
including banks, insurers and hedge funds to offer strict consumer
protection.
MiFID, which will come into force in November, will have knock
on impact for stock exchanges and other stock trading venues, which
must be able to prove that they have given the best possible deal,
known as "best execution", to investment firms.
Markus Gerdien is president of business area market technology
at Nordic Exchange OMX, which supplies technology to more than 60
exchanges throughout the world.
"With [MiFID] in mind all trading venues must have a technology
infrastructure that ensures that all steps are taken to deliver
efficiency and meet best execution requirements," he said.
Exchanges should deploy modular rather than monolithic tools to
generate business and process transactions, if they are to meet the
MIFID requirements effectively, he said.
"In order to be competitive, trading venues must constantly be
able to assure investors best execution. Here the focus is no
longer strictly on price, other factors like cost, speed,
likelihood of execution and settlement are equally important," he
said. "Any trading venue will have to earn its business in the
future."
The London Stock Exchange has invested £40m and four years in
its
Tradelect core trading platform which went live in June.
Techonology is critical for implementing the new rules. "All MiFID
services will be based on next-generation technology, allowing
increased capacity, speed and flexibility," it said.
Plus Markets, which was granted recognised investment exchange
status in July, is installing trading and market surveillance
technology from OMX in order to expand the number and range of
securities it trades. The technology will enable the share trading
venue to offer services that are fully MIFID compliant.
Nemone Wynn-Evans, director of business development, at stock
trading venue, Plus Markets, said it is in every trading venue's
interests to offer best execution to investment firms.
"PLUS Market is confident its platform will be an ideal venue
for investors to optimise best execution under MiFID, offering
efficient and transparent on-exchange trading supported by market
surveillance to [industry] standards," she said.
"The technology has to be resilient and fast. It has to be
scaleable to deal with ever rising volumes - particularly so-called
'spike' volumes in busy markets - and flexible enough to
accommodate changing user technology interfaces, new contract
developments and new regulatory requirements," she added.
The Financial Services Authority said the MiFID regulations are
almost finalised with the major issues resolved and only a few
points to iron out.
Under Mifid, investment banks, pension funds, and other
commercial investors must take all reasonable steps to obtain the
best possible result for their clients taking into account a range
of factors including price, costs, speed and the likelihood of
execution settlement. Stock exchanges and stock trading venues can
help investment firms achieve this by providing competitive
services along with transparency and reporting services.