Moritz Christian Weber

Shedding Light on the Dark: OTC Equities Trading in Europe

The key idea ofMiFID was to establish a comprehensive regulatory regime governing trading in financial instruments in order to promote market efficiency,market integrity, fairness, and competition among various forms of trading mechanisms and venues.Three years after the implementation of MiFID, the reality of European markets reveals that the competition between regulated markets and the newly emerged MTFs works in favor of investors and has improved market quality. In this article, the authors compare the objectives and spirit of MiFID to the status quo and evolution of European equity trading with a specific focus on the role of OTC trading. Their findings contribute to the current industry and regulatory discussion. The authors provide proposals for possible future regulatory adaptations and enhancements.

The State of Play in European Over-the-Counter Equities Trading

In early 2014, the European Council, the European Parliament, and the European Commission reached an agreement on MiFID II (Markets in Financial Instruments Directive) and on MiFIR (Markets in Financial Instruments Regulation). Because the new regulatory framework will significantly influence and likely reduce European over-the-counter (OTC) equities trading, our article investigates the current state of OTC trading in Europe. Therefore, we investigate OTC transaction sizes for Euro STOXX 50 constituents between January 2008 and June 2013, discuss whether and how they might have caused market impact, and give insights on how this affects the European trading landscape.

A Methodology to Assess the Benefits of Smart Order Routing

Smart Order Routing technology promises to improve the efficiency of the securities trading value chain by selecting most favourable execution prices among fragmented markets. To measure the extent of sub-optimal order executions in Europe we develop a simulation framework which includes explicit costs associated with switching to a different market. By analysing historical order book data for EURO STOXX 50 securities across ten European lectronic markets we highlight an economically relevant potential of Smart Order Routing to improve the trading process on a gross basis. After the inclusion of switching costs (net basis), the realisability of this value potential depends on whether the user can directly access post-trading infrastructure of foreign markets or has to make use of intermediaries’ services.

Conceptualization and Realization of Agile Building Blocks for a User-Configurable Trading Platform

Market models are the blue prints of electronic trading platforms. Having various specifications and trading styles, traders on todays market places are challenged to establish to find markets with models that fit their trading habits. Established market structures will need to become more flexible in order to address the needs of traders. This paper analyses efficient building blocks for such a user-configurable trading platform based on the design science research methodology. After investigating previous academic work on trading platforms, an agile trading platform is designed to be flexible, fast and to have low entrance barriers. We present a prototype as a proof-of-concept and subsequently evaluate and discuss it with given kernel theories.