1. Unravelling Ariadne's MiFID II Thread: Pre- and post-trade transparency for non-equity markets
JORGE YZAGUIRRE SCHARFHAUSEN

2. The fixed income markets after MiFID II
Jorge Yzaguirre Scharfhausen - Markets Director, Equities, Fixed Income and Derivatives,
Bolsas y Mercados Españoles (BME)
Current fixed income trading models in BME
Regulatory & market milestones
T2S & MiFID II regulations main impacts
Solutions provided by BME’s FI trading Platforms
Future fixed income trading model in BME
Next steps

3. Current fixed income trading models in BME.
Regulated Market
Commercial Paper, Bonds, Covered Bonds, Securitizations.
Market Members are resident & non resident entities.
Cash trading & repo.
Bilateral trading.
Standard settlement cycle is T+2, but up to both counterparties.
Platform
Retail bonds listed in AIAF.
Treasury Bills, Government Bonds for retail distribution.
“All to all” market model. Multilateral trading, with specific bilateral segment.
Cash trading. T+2.
With communication & settlement instructions to IBERCLEAR.
Regulated Markets
Regional Governments’ securities.
Cash trading. T+2, with communication & settlement in local CSDs.
MTF
T- Bills, Government Bonds & STRIPs.
Participants are Spanish Treasury’s Primary Dealers; residents and non residents.
Interdealer market model. Multilateral trading, own account, firm quotes and blind.
Cash trading. Standard T+2 settlement cycle, T+3 in new auctions.
Repo.
POA based matching instructions in IBERCLEAR.
Developed for mid-cap companies access to fixed income funding.
Uses SEND platform technology.
AIAF
SEND
EXCHANGES
SENAF
MARF

4. Current fixed income trading models in BME

5. Regulatory & market milestones.
Reform & T2S
Phase I: April 27th 2016
Phase II: Sept 17th 2017
T+2.
Change in registry.
Single settlement system.
Pan-European post-trading standardization.
MAD (I & II) / MAR
July 3rd 2016
Guarantee the integrity of the financial markets.
Avoid insider dealing & market manipulation, suspicious transactions reporting, etc.
Research publication.
Definition of homogeneous rules in markets.
MiFID 2 /MiFIR
January 3rd 2018
Market transparency ( pre & post ).
Best execution.
Investors protection.
Market structure.
Trades reporting.
CMU
2017
Capital mobilization to SMEs, new infrastructures and projects financing.
Deeper capital markets.
Facilitate transnational investments.
Promote the stability of the financial sector.
Surveillance convergence and common set of rules.

6. T2S & MiFID II regulations main impacts
Breaks the bi-univocal historical relationship between trading and settlement.
Registry & settlement procedures are unified with those in equities Markets.
Accounts daily variations disappear.
3rd parties accounts records are substituted by a new Post Trade Interface -PTI.
Impacts Trading
Members
T2S
(Sept 2017)
Impacts Clearing
Entities
Transparency in Markets ( pre & post ).
Trade reporting to surveillance authorities.
Trading on-venue.
The majority of FI trading will fall under the OTC / SI regimes.
Impacts Trading
Members
MiFID II
(Jan 2018)

7. Solutions provided by BME’s FI trading Platforms
T2S
(Sept 2017)
MiFID II
(Jan 2018)
BME trading platforms are adapted to be
T2S & MiFID II compliant.
Differentiate between Trading Members and Clearing Members.
New accounts structure at each Member’s level.
Adaptation to new T2S flows & messages.
Resolve transparency obligations.
Fulfil the new regulatory requirements.
Avoid the inclusion of Markets Members in the Systematic Internalizing regime.

8. Future fixed income trading model in BME

9. NEXT STEPS June -July June May 2017 2017 2017 May 6th -7th 2017
New API specifications
May
2017
New RFQ system available for testing
May
6th -7th 2017
New POA
template & formal documentation delivery
T2S migration weekend test