Shedding Light on the Dark: OTC Equities Trading in Europe

Abstract

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.