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European bond trading volumes plunge as traders adjust to Mifid II

12 January 2018

The deferrals for the two exchanges come despite frequent reiterations from the European Securities and Markets Authority (ESMA) that there would be no open access exemptions for listed derivatives.

"So far [there is] no difference compared to a regular day", said Markus Huber, a trader at City of London Markets.

United Kingdom sovereign bond volumes were 11.4 per cent below their 30-day average, while sterling-denominated corporate bond volumes were 46.1 per cent below average.

Mifid II, short for Markets in Financial Instruments Directive II, is created to make the financial system safer and more transparent.

"The key thing to realise is MiFID II isn't done". The rule changes were delayed by a year until 3 January to give market participants more time to prepare.

The open access model is the foundation of LCH, the world's largest clearing house for derivatives, whereas ICE and Eurex operate under a vertical model, meaning derivatives traded on their exchanges have to be cleared through their own CCPs. Regulators in the United Kingdom and Germany stepped in hours before Mifid II was triggered to give exemptions to three clearing houses.

Alexandra Hachmeister, chief regulatory officer at Deutsche Boerse, said the waiver was needed for its Eurex arm because it was unclear how Britain's financial market will look once the United Kingdom has left the European Union in 2019. Maijoor said the temporary waivers were a "one-off" and new requirements for clearing houses would happen in 2020. The revisions include requiring banks and brokers to charge customers directly for their research, higher reporting requirements for transactions, as well as limits on the extent to which trades can be carried out through private "dark pools" where details are not publicly disclosed.

European bond trading volumes plunge as traders adjust to Mifid II