2.3. Research Fees Under the sprawling Mifid II

2.3. Commodity Trading

MiFID II will require four distinct levels of reporting when it comes to commodity derivatives. 

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1. Investment firms and trading venues will need to make public, on a weekly basis, aggregate positions in each derivative traded on their trading venue (when the commodity position limits are breached) ?

2. Investment firms and trading venues will need to publish, on a daily basis, to the National Competent Authorities (NCA) a detailed breakdown of all positions – including those of their members and its members’ clients ?

3. Investment firms will need to provide the NCA with a detailed breakdown of all positions held, on a daily basis, which were traded over the counter – including those of their clients and their clients’ clients until the end client is reached ?

4. Participants of regulated markets, multilateral trading facilities and organised trading facilities to report, on a daily basis, to the investment firm or venue operator their positions in contracts traded on that venue. This includes those of their clients and their clients’ clients until the end client is reached.

 

2.4. Dividing the Trading Fees and Research Fees

Under the sprawling Mifid II directive, Investment firms must split out the cost of investment research and trading for the first time. They will also have to tell investors how much of their money is being spent on analyst research. This has prompted some asset managers, such as Jupiter and Woodford Investment Management, to decide it will be simpler to cover the payments themselves. Franklin Templeton, Allianz Global Investors, Fidelity International, Natixis Global Asset Management, Old Mutual Global Investors, Axa Investment Managers, Ashmore, Royal London, Candriam and Aviva Investors are still considering whether to pay for the cost of research internally or to pass it on to investors. (Mooney, 2017)

For many large investment houses with global operations, the decision on how to pay for research has been hampered by divergent rules in the US and Europe. In the US, brokers are prevented from receiving direct payment for research unless they are registered as investment advisers. (Mooney, 2017)

 

3. IMPACT IN THIRD COUNTRY ?

Third country here refers to all the countries which doesn’t come under this regulation. common ways that third country investment firm interact with Europe, including:

(i)  operating a portfolio management subsidiary in Europe ?

(ii)  operating a marketing subsidiary in Europe to offer products and services to European investors and clients ?

(iii)  managing assets on a cross-border basis from their home country directly for ?European clients ?

(iv)  providing sub-advisory services from the home country to a MiFID investment ?manager or European fund ?

(v)  simply trading in European fixed income and equity markets. (Christian & Frase, 2016)?

This is strategically important for many financial institutions like investment banks and asset management firms based in Europe, so is for Deutsche Börse in terms of both customer base and business operations. Considering Brexit date approaching near, UK will also become the part of third country. Many firms including Deutsche Börse which have operations based in London can use position for strategic purposes as there London will not come under these regulations and thus, re-evaluate their stand towards splitting the operations between London and mainland Europe. Another major concern for Deutsche Börse is that there strategy is to increase the trading period of their trading platform Eurex to 23 hours to compete with other derivative exchanges such as CME (Chicago Mercantile Exchange) Globex and ICE future Europe both operate for 23 hrs (US Commodity Future Trading Commision)

 

 

3.1. Algorithmic Trading  ?

Broadly MiFID II mostly prohibits the unregulated firms from the third country to engage in algorithmic and comparable trading in EU trading venues but there is still difference in adoption of this rule according to the EU country in which trading venue is operating.

In the UK, non-EU traders will still be able to participate in algorithmic trading on a UK exchange on a cross-border basis without regulation due to the UK’s “overseas persons” exclusion which excuses foreign traders from local licensing requirements. Though, if the non-EU company have some subsidiary which is based UK, That subsidiary has to comply with all the requirement logged in MiFID II  (Shearman & Sterling LLP, 2017).

2.3. Commodity Trading

MiFID II will require four distinct levels of reporting when it comes to commodity derivatives. 

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For You For Only $13.90/page!


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1. Investment firms and trading venues will need to make public, on a weekly basis, aggregate positions in each derivative traded on their trading venue (when the commodity position limits are breached) ?

2. Investment firms and trading venues will need to publish, on a daily basis, to the National Competent Authorities (NCA) a detailed breakdown of all positions – including those of their members and its members’ clients ?

3. Investment firms will need to provide the NCA with a detailed breakdown of all positions held, on a daily basis, which were traded over the counter – including those of their clients and their clients’ clients until the end client is reached ?

4. Participants of regulated markets, multilateral trading facilities and organised trading facilities to report, on a daily basis, to the investment firm or venue operator their positions in contracts traded on that venue. This includes those of their clients and their clients’ clients until the end client is reached.

 

2.4. Dividing the Trading Fees and Research Fees

Under the sprawling Mifid II directive, Investment firms must split out the cost of investment research and trading for the first time. They will also have to tell investors how much of their money is being spent on analyst research. This has prompted some asset managers, such as Jupiter and Woodford Investment Management, to decide it will be simpler to cover the payments themselves. Franklin Templeton, Allianz Global Investors, Fidelity International, Natixis Global Asset Management, Old Mutual Global Investors, Axa Investment Managers, Ashmore, Royal London, Candriam and Aviva Investors are still considering whether to pay for the cost of research internally or to pass it on to investors. (Mooney, 2017)

For many large investment houses with global operations, the decision on how to pay for research has been hampered by divergent rules in the US and Europe. In the US, brokers are prevented from receiving direct payment for research unless they are registered as investment advisers. (Mooney, 2017)

 

3. IMPACT IN THIRD COUNTRY ?

Third country here refers to all the countries which doesn’t come under this regulation. common ways that third country investment firm interact with Europe, including:

(i)  operating a portfolio management subsidiary in Europe ?

(ii)  operating a marketing subsidiary in Europe to offer products and services to European investors and clients ?

(iii)  managing assets on a cross-border basis from their home country directly for ?European clients ?

(iv)  providing sub-advisory services from the home country to a MiFID investment ?manager or European fund ?

(v)  simply trading in European fixed income and equity markets. (Christian & Frase, 2016)?

This is strategically important for many financial institutions like investment banks and asset management firms based in Europe, so is for Deutsche Börse in terms of both customer base and business operations. Considering Brexit date approaching near, UK will also become the part of third country. Many firms including Deutsche Börse which have operations based in London can use position for strategic purposes as there London will not come under these regulations and thus, re-evaluate their stand towards splitting the operations between London and mainland Europe. Another major concern for Deutsche Börse is that there strategy is to increase the trading period of their trading platform Eurex to 23 hours to compete with other derivative exchanges such as CME (Chicago Mercantile Exchange) Globex and ICE future Europe both operate for 23 hrs (US Commodity Future Trading Commision)

 

 

3.1. Algorithmic Trading  ?

Broadly MiFID II mostly prohibits the unregulated firms from the third country to engage in algorithmic and comparable trading in EU trading venues but there is still difference in adoption of this rule according to the EU country in which trading venue is operating.

In the UK, non-EU traders will still be able to participate in algorithmic trading on a UK exchange on a cross-border basis without regulation due to the UK’s “overseas persons” exclusion which excuses foreign traders from local licensing requirements. Though, if the non-EU company have some subsidiary which is based UK, That subsidiary has to comply with all the requirement logged in MiFID II  (Shearman & Sterling LLP, 2017).

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