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MiFID II Seems to be Succeeding in Increasing Transparency

2 minute read

The new regulatory requirement of MiFID II has been in effect for six months and it appears to be working. This recent Bloomberg article really caught our attention as it highlights an astonishing +70% increase in the reported trading volumes for European ETFs.

European ETF trading per month, euro billions. Source Bloomberg.

Quick refresher on MiFID II…The European Union implemented the Markets in Financial Instruments Directive II (MiFID II) in January 2018. The legislation has its origins in the Global Financial Crisis and was created with the intent of increasing market transparency via rules on everything from unbundling research and execution costs to dark pools and derivatives. The ultimate goal of MiFID II is to make the financial markets more efficient and transparent and to strengthen protection for the investor; noble goals, indeed.

Back in October 2017, we discussed the potential impacts MiFID II might have on U.S. asset managers. While those impacts still play out, this Bloomberg article points to some early success for the legislation.

Consider the following highlights:

  • Transparency increased by +70% for ETF trade volumes as off-exchange trading was now published for the first time

  • For the month of May, off-exchange trading of ETFs eclipsed exchange trading by 4 billion euros (65 billion euros vs. 61 billion euros, respectively)

While not perfect in capturing 100% of ETF trades, it is still a major improvement in understanding trading volume. With more and more trading being done in dark pools, the importance of price discovery gets lost. MiFID II was intended to increase trading in the lit market and increase market transparency. After six months of implementation, it appears to be succeeding.

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As international equity investors, the team at R Squared Capital Management (former team at Julius Baer / Artio Global) utilizes fundamental and macro analysis in our quest to correctly identify structural tailwinds and headwinds at the geographic, sector and company levels.   


Elyse Waldinger.pngElyse Waldinger is a Partner and Chief Operating Officer at R Squared Capital Management.

Prior to joining R Squared, Elyse was the Head of Trading and Portfolio Support with the International Equities team at Artio Global Management. Elyse joined Artio in 2000 when the firm was part of the Julius Baer Group. Prior to Artio Global / Julius Baer, Elyse was a Sales Assistant on the Municipal Bond Trading Desk at Morgan Stanley Dean Witter for three years and a Portfolio Assistant with Burnham Securities for two years.
Elyse received a Bachelor of Science degree from the A.B. Freeman School of Business, Tulane University.
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Posted by Elyse Waldinger on Jul 12, 2018 2:50:30 PM

Topics: International Equity, From the Desk of Elyse Waldinger


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