The main reason why there is MiFID II transaction reporting, which is an improved version of markets in financial instruments directive, is to offer investors protection. Moreover, it will help inject transparency in all classes of assets: from fixed income to equities, foreign exchange, and exchange-traded funds.
MiFID II was necessitated by the need to restore investor confidence after the financial depression. Also, it aims to move businesses traded over the counter into regulated trading venues. MiFID covers retail derivatives, including contracts- for- difference, retail derivatives, exchange-traded products, currencies, commodities, fixed income, and equities markets.
MiFID II works in favor of brokers who connect clients to MTF and market makers. Below we look at some of the benefits.
Transparent Pricing
When you use the MiFID II, they offer you transparency both pre and post-trade. You will achieve clarity because the volume that is available at every spread is seen every time. You, as the user, you can easily find the best price before placing your order.
MiFID II transaction reporting enables you to have details of every quote and order over the last 24 hours. For the post-trade users, you will be able to see the volume, price, and time of all trading activities on the MTF. You can download the details for any period, and this gives you the chance to analyze how pressures of buying and selling change.
Investor Protection
MiFID II looks into ways it can enhance the execution of all business transactions. Under MiFID II, it is a requirement that you follow all the necessary steps to obtain the best results. Several publicity requirements come with using MiFID II.
All investments firm should produce their execution quality at least once a year. It is also a requirement for the firms to provide at least five execution venues of every year. Moreover, this information should come with specific data that relates to the quality of transactions of a particular transaction.
Non-Discretionary Rules
MiFID II brings about a level playing field for all the participants in the market. Sellers and buyers match using a transparent rule that does not discriminate members. A user will be able to buy a product at a specific price as long as it is in the system.
Conclusion
The enhanced obligations that come with MiFID II will pose challenges to several firms, but they need to embrace it. The advantages of the new system will help everyone make the process of transacting business comfortable and transparent.
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