New MiFID rules put traders’ jobs at risk

Close to 90% of European traders see corporate debt moving to electronic platforms

Sweeping regulations designed to make markets more transparent threaten to erode the last bastions of European voice trading, from bonds to commodities.

Under MiFID II rules, which take effect in January, traders in the European Union will have to report a host of information to demonstrate they’re executing clients’ trades at the best prices and in the right venues.

Tracking those details is faster and cheaper when the trades are done by computer, rather than by shouting down the phone.

“Voice trading will be reduced to those scenarios where it truly remains the most efficient way of finding and matching counter-party interest, at a cost,” said Svante Hedin, the co-head of trading for SEB Markets in Stockholm.

The impact will be felt in markets where voice trading still holds sway. Almost 90 per cent of European traders see corporate debt moving to electronic platforms, a recent survey by dark-pool operator Liquidnet Holdings Inc. found. While trading by phone or in person won’t vanish, it will diminish, traders said.

MiFID II, the revised Markets in Financial Instruments Directive, forms the centrepiece of European securities markets legislation. Largely developed in the aftermath of the global credit crisis, it’s intended to impose transparency and root out conflicts of interest in financial markets, with rules governing everything from dark pools to analyst research.

For securities firms, one of the biggest challenges will be setting up systems to move from a voice-driven trading environment to one that’s increasingly digitised to meet MiFID II’s data-reporting requirements.

A number of financial technology companies have popped up to assist banks, brokers and asset managers conform to the new standards.