1. © ICMA Centre www.icmacentre.ac.uk MiFID & EU Markets what is next ECMI – London Stock Exchange Brian Scott-Quinn – ICMA Centre BSQ1@icmacentre.ac.uk 1 st February 2010

2. The New Business Models success depends on meeting a new market need London has never had a concentration rule London had LSE competitor – Tradepoint 1993 Failed – did not address a new market need Chi-x came onto scene at time of change –Cheap new systems –Demand from algorithmic traders –Less capital being committed by traditional market markers? Dark pools a response to new market need –Institutions finding average market size on LSE falling 2

3. Background to MiFID THREE OBJECTIVES + LISBON 2000 SUMMIT AIM Establishing a single market in wholesale financial services Making retail markets open and secure Strengthening the rules on prudential supervision “EU to become the most competitive and dynamic knowledge- based economy in the world capable of sustainable economic growth with more and better jobs and greater social cohesion” 3

4. Some MiFID issues Can we distinguish between Investment Firms and Regulated Markets (RM)/ Mulilateral Trading Facilities (MTFs) Both operate crossing networks/ dark pools but under different regulatory frameworks Should they be the same? Can we distinguish – a broker/dealer: providing a discretionary service –An RM/MTF simply providing a platform Do we need to re-examine the MiFID pre-trade transparency waiver? 4

5. The new world High frequency trading Electronic market making Hedge fund algorithmic trading Dark pools Lack of dealer capital due to banking crisis Need for ‘a vibrant capital market to help EU achieve its Lisbon goal? Does MiFID have a role here? 5

6. Macro issues Is MiFID only relevant to trading large company stocks Would bond market pre-trade transparency help Will the new Paris Euro bond market and the new LSE retail sterling bond market help Will MiFID help smaller companies raise finance when banks won’t lend With up to 60% of trades now algorithmic, does this help the economy – does it give liquidity to others WHAT COMPANY WANTS SHAREHOLDERS FOR THE BLINK OF AN ALORITHM 6