European Fixed Income and MiFID2: The Planets Are Not Aligned
Investments banks’ cash fixed income revenues are expected to be down 15–20% in 2013 from their 2010 levels. For some players, the extension of MiFID requirements in this environment could be the final nail in the coffin.
In a new report, European Fixed Income and MiFID2: The Planets Are Not Aligned, Celent analyses the evolution of the European cash fixed income market, the main MiFID requirements raising issues among market players, and what market players need to make the implementation of MiFID2 a success.
Investment banks will shift from cash-intensive credit and rates trading to more efficient flow and electronic trading, investing in heavyweight technology to provide the buy side with functionalities such as execution algorithms and smart order routers for fixed income. The numerous RFQ multiproduct trading venues will see a strong push from entrants with innovative business models. The buy side will have to invest more in electronic trading capabilities and possibly take on a liquidity-providing role.
“Extending MiFID requirements to the cash fixed income businesses in the current environment is dangerous,” says Joséphine de Chazournes, Senior Analyst with Celent’s Securities & Investments group and author of the report. “Liquidity is scarce. If the market structure does not evolve, many players may be driven out of business.”
This report outlines six developments that market players should be working on to make the implementation of MiFID2 a success in the European cash fixed income market.
Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned subsidiary of Marsh & McLennan Companies [NYSE: MMC].
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Table of Contents
A Shift in Business Orientation
Changing Market Dynamics
The Review of MiFID: Impacts for European Cash Fixed Income
Les Grandes Lignes
The Keys to Implementing MiFID2 Successfully
Leveraging Celent’s Expertise
Support for Financial Institutions
Support for Vendors
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