This Week: Europe’s Mifir review, FIA Tech, TRG Screen, UPI implementation, and more

Afme calls for more ambition from EU on Mifir/d II

The European Parliament formally approved the final text of the reviewed Markets in Financial Instruments Regulation (Mifir) and Markets in Financial Instruments Directive II (Mifid II) in a plenary session this week. After a negotiation process between the EU’s three main legislative bodies, a compromise text was completed in October last year. Having secured Parliament’s approval, the text will next pass to the European Council, and then into law. This process is on track to be completed in April.

The Association for Financial Markets in Europe (Afme), welcomed the development, but said that more has to be done if the EU is to achieve its goal of creating a capital markets union (CMU). In particular, Afme called on the EU to prioritize the implementation of the consolidated tapes (CTs) for equities and fixed income.

Giulia Pecce, head of Mifid policy at Afme, says that appropriately constructed CTs are a crucial tool for integrating EU markets, reducing home bias in investments, and democratizing access.

“Our views are that the equity CT should be continuous and real time, and provide an appropriate depth of the order book. The deeper the book made visible, the wider the use cases and the viability for the CT,” she says.

Although European legislators compromised on an equities tape displaying only the best bid and offer, Afme is calling for five levels of depth, which it says would help firms assess the liquidity profile of a particular security. “Once the equity CT is established, we encourage a thorough re-assessment of the scope of the equity CT as part of the future Esma review,” Pecce says.

Beyond the consolidated tapes, Pecce says that the Mifir/Mifid II review “could have been more ambitious in removing obstacles to a more efficient equities and fixed income trading environment. On fixed income, we were disappointed to see the lack of any evidence corroborating the changes to post-trade transparency and, in particular, that maximum deferral periods are codified in the Level 1 framework. A greater use of delegations to Esma for the purpose of evidence-based calibration would have been far more appropriate.”

The Mifir review aims to harmonize deferral regimes for non-equity instruments (how long a market participant can wait before publishing the details of a transaction) across EU jurisdictions. You can read more about post-trade transparency here.

The EU Listing Act package, for which negotiations are rapidly progressing, also includes a set of changes to Mifid rules relating to investment research. Pecce says that these changes could have a big impact on EU competitiveness. “Investment research is crucial to the success of EU capital markets: it gives firms visibility and, as such, opens up investment opportunity. The removal of the market cap threshold coupled with increased payment optionality for investment research (if appropriately calibrated) can help revive investments in EU companies and increase capital flows.”

Deutsche Bank, SocGen join FIA Tech ownership consortium

Deutsche Bank and Societe Generale have joined an ownership consortium and funding round run by exchange-traded derivatives technology provider FIA Tech, which offers tools and data to help market participants with a variety of processes, from regulatory reporting to brokerage processing. It is owned by a consortium of 11 clearing firms as well as the Futures Industry Association.

The banks are adding a further $14.8 million to the $25.4m raised in 2023 for the strategic growth of FIA Tech’s Trade Data Network, which is designed to reduce clearing costs and delays for brokers. The network will initially focus on allocations processing and trade confirmations, providing trade lifecycle transparency across the multiple brokers and the clearinghouse on each trade.

Following the investment, representatives from both firms will join FIA Tech’s board of directors.

TRG Screen buys reference data usage specialist Xpansion

New York-based inventory and data cost management software vendor TRG Screen has bought long-term partner Xpansion, a London-based provider of cloud-based services for reference data usage monitoring.

The deal, terms of which were not disclosed, will see Xpansion’s team and products become part of TRG Screen’s organization, extending and expanding the vendor’s suite of usage management solutions. Xpansion offers three products: Xmon, which manages data spend; Xprocess, which tracks business processes; and Xplore, which enables users to organize, classify, and search data assets to identify insights. Combined, these give clients transparency and control over their reference data usage.

Firms on track for US introduction of UPI regulatory reporting, DSB says

The Derivatives Service Bureau (DSB), the body behind the Unique Product Identifier, says that 131 organizations are now subscribed to the UPI service.

With the first compliance date for UPI regulatory reporting in the US due on January 29, DSB officials say that the number of firms set up on the service is in line with its onboarding expectations at this stage. Of the organizations currently live on the service, 35% are headquartered in the US.

The UPI is being introduced gradually in G20 markets to help regulators keep track of systemic risk. The US is the first jurisdiction to phase in UPI reporting, followed later in the year by the EU, UK, Australia, and Singapore.

Since the DSB launched the UPI in October 2023, more than 850,000 UPIs have been assigned. UPI volumes broken down by asset class are published on the DSB website each week.

Private equity firm to acquire EquiLend

Private equity firm Welsh, Carson, Anderson & Stowe (WCAS) has agreed to acquire a majority stake in EquiLend, a technology provider for securities finance markets. The price of the deal was undisclosed. The acquisition is set to close in Q2 2024, subject to regulatory approvals.

Separately, Welsh Carson will also invest $200 million for EquiLend’s organic growth initiatives and acquisitions.

EquiLend was founded in 2001 by a consortium of global banks and broker-dealers. Its client base is comprised of nearly 200 asset owners, agency lending banks, broker-dealers, and hedge funds. It operates a securities lending trading platform called NGT.

Saxo Bank partners with FairXchange for liquidity management analytics

Trading and execution services provider Saxo Bank has struck a deal to use FX data firm FairXchange’s liquidity management platform, Horizon.

As WatersTechnology has written, a major part of Saxo Bank’s business is partnering with firms in the wholesale market. These firms consume Saxo’s platforms via its open API. The partnership with FairXchange is intended to help source better liquidity for those clients.