MiFID II Liquidity Landscape: Q3 2019

With a deal and delay versus a no-deal Brexit looking increasingly likely, European traders would be forgiven for believing they may have escaped the dangers of a full Share Trading Obligation (STO). Yet risks remain, including a potential longer term regulatory split between UK and European markets as policy tweaking post MiFID II continues on both sides of the channel.

Overall market volumes experienced a slowdown over the summer averaging just EUR 34bn, and with lower activity, the execution environment is set to become more challenging as European regulators look to shore up liquidity on European venues post-Brexit. ESMA’s recent opinion limiting the conditions under which periodic auctions can operate may just be the start of future wider regulatory divergence between Europe and the UK, particularly in relation to Systematic Internalisers. Liquidnet takes a look at the latest market structure developments and what this could potentially mean for European liquidity and the wider market eco-structure as the buy-side continues to grapple with delivering best execution in an evolving market. 

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Rebecca Healey and Charlotte Decuyper, Market Structure + Strategy, EMEA, and Gareth Exton and Joe Fields, Global Execution + Quantitative Services