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The Periodic Table

Traders Magazine Online News, April 19, 2018

Steve Grob

I read with interest, and some dismay, Sam Agini’s great piece in Financial News recently about Marcus Ferber writing to ESMA be-moaning periodic auctions. Perhaps the most asinine comment attributed to Mr Ferber is that some such mechanisms are a “blatant attempt to undermine the Mifid II provisions aiming at having a larger share of trading in the light”. It is hard to know where to start in deconstructing this statement, but let me have a go anyway.

The last part really sums up everything that is wrong with the MiFID regulations. When will regulators and their political masters understand that the idea that “lit is good and dark is bad” is (a) wrong and (b) a gross oversimplification? So much so that it reminds me of Orwell’s sheep in Animal Farm bleating out “4 legs good two legs bad” as they seek to wrest control from their human masters. It’s not as if periodic auctions are anything new either as the concept of auctions has existed pretty much as long as trading has. And, just like the periodic table of elements, the idea covers a huge array of different entities each with their own specific properties and configurations. But, yet again, I fear that in “coming up with strategies”, as Mr Ferber asks, ESMA will ignore this and seek some sort of cap or other blunt instrument that does more harm than good.

The simple fact is that trading only happens between a willing buyer and a willing seller. Now that doing this in equities is so unbelievably complicated, it means that understanding and assessing outcomes is harder than ever. And, if I can’t understand this, how can I know whether any transaction was any good or not? I thought getting a better, clearer, fairer deal was what the regulations were supposed to be about…

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