Bloomberg rolls out Mifid II credit trading system

Bloomberg has upgraded the legal status of its credit trading business in Europe, falling into line with rivals as they prepare for new rules that will revamp the region’s markets.

The US data and information group is among several of Europe’s big trading venues that have begun rolling out their new systems five months ahead of the deadline.

It went live with its enhanced platform last week, said Nicholas Bean, global head of fixed-income trading at Bloomberg. This week Thomson Reuters, its big rival, will also begin moving its 2,500 customers on to its upgraded foreign exchange trading venue, as the rules toughen trading around currency derivatives and forwards. Last week Bats Global Markets, the largest pan-European stock market, released software that is compliant with new rules for equities.

With the rollout, the venues are hoping to spur tardy institutional investors to speed up their own plans. The legislation, known as Mifid II, will mandate more transparency in over-the-counter markets.

Mifid II has been more than six years in preparation, and while exchanges, banks and technology providers have been busy adapting to the new regime, many fund managers are still not ready for the January 3 start date. A survey by JWG, the UK consultancy, found more than 30 per cent of institutional investors had a “high risk” of not being compliant.

“It is one of the most complex regulations I’ve seen in my career, and there’s still not a high level of understanding ‎on the potential impact of Mifid II across the financial industry,” said Leo Arduini, head of European markets, at Citi.

Under the new Mifid rules Bloomberg has become a so-called “multilateral trading facility”, putting it on the same legal status as rivals including MarketAxess, Nex Group and Tradeweb.

Although one of the market’s biggest players, Bloomberg operated a “trade arranging service” and was regulated as a service company. Because it did not formally execute trades, it did not need to meet the same reporting requirements — and additional compliance costs — as rivals. Now its customers will have to sign off on new rule books of hundreds of pages, covering issues like operations and data ownership.

Mr Bean said Bloomberg had considered getting the venue ready shortly before the January introduction. “But it’s a high-risk strategy, Mifid will put a tremendous burden on customers all at the same time.”

Bloomberg accounts for nearly 40 per cent of government debt and 70 per cent of investment grade deals in Europe, and it put its swaps trading business on the platform last year. It has also beefed up its deal reporting business in preparation.

Trading executives admit the scope of Mifid II goes far beyond post-crisis regulation in other jurisdictions, like the US Dodd-Frank act. EU policymakers are keen to direct more trades away from the internal trading desks of banks and on to regulated, exchange-like venues.

The new rules could radically change the fixed income market, Mr Arduini added. ‎ “There will be a strong demand in terms of transparency and standardised data format, it’s a completely different dimension from Dodd-Frank, in terms of transparency requirements.”

Neill Penny, co-head of trading at Thomson Reuters, said: “Our customers understandably have questions about MTF trading and we have put considerable work into guiding them through this process.”

Bats will roll out a final version of its software in October.

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