BofA to Become MiFID II Venue for Bonds, ETFs, DerivativesBy
Bank follows Goldman Sachs, Barclays in announcing MiFID plans
Systematic internalizers offer advantages over other platforms
Bank of America Corp. will make markets in bonds, currencies, derivatives, equities and exchange-traded funds through a new type of trading venue being ushered in by Europe’s MiFID II overhaul of financial regulations.
The bank will become a systematic internalizer, or SI, from MiFID’s Jan. 3 start date, it said in an emailed statement. Clients trading European Union securities with Bank of America’s SI will escape MiFID II’s onerous trade-reporting requirements, potentially making the SI attractive to fund managers seeking to trade bonds and off-exchange derivatives.
In stocks, SIs offer advantages over exchanges in two main ways: They are able to price more flexibly than public stock markets. SIs are also able to sidestep MiFID’s caps on dark trading.
Banks and algorithmic trading firms acting as SIs have to use their own capital to trade with their clients, rather than just matching client orders against each other like on a stock exchange.
Bloomberg LP, the parent of Bloomberg News, offers bond-trading systems, and services for transaction reporting and best execution to meet the new rules.
Below is a list of some of the companies that will become SIs and which securities they will trade using the new status:
- The algorithmic traders that will operate SIs to trade equities under MiFID II are Citadel Securities LLC, Tower Research Capital LLC, Sun Trading, XTX Markets Ltd., Virtu Financial Inc. and Jane Street Financial Ltd. Virtu and Jane will also trade ETFs via their SIs. Citadel Securities will also trade fixed income.
- JPMorgan Chase & Co., Deutsche Bank AG, UBS Group AG, Goldman Sachs Group Inc., Barclays Plc and Bank of America have all confirmed plans to become SIs for equities, fixed income and derivatives. Most large banks are expected to use the SI umbrella for at least one asset class
- Nordea Bank AB and Mizuho International are among banks saying they plan to be SIs for fixed income; BNP Paribas SA for some non-equity instruments and ETFs; Bank of New York Mellon Corp. for currency derivatives
- Europe’s largest ETF trader, Flow Traders NV, has said it will not become an SI, as has fellow Amsterdam giant Optiver BV