Morgan Stanley (MS) and Credit Suisse Group will become trading venues under MiFID II to make markets in bonds, equities, currencies and derivatives with their clients, two of the last major banks to reveal how they will trade under the European Union's sweeping overhaul of financial regulation.
Morgan Stanley will become a systematic internalizer on Jan. 3, it said in a message Thursday to clients, while Credit Suisse announced its plans on its website the same day. Clients that trade with a systematic internalizer, or SI, avoid having to comply with MiFID II's rules on trade reporting, including the requirement to submit reports within 15 minutes of the deal taking place for some securities.
Banks and proprietary traders acting as SIs have to trade using their own capital, and cannot match orders between clients. Traders of bonds and off-exchange derivatives in the EU have never had to file trade reports, so they may decide to do more business with SIs to escape the new regulatory burden.
Fund managers that use SIs also avoid having to submit personal-identity data, such as passport numbers, for their traders.
Equity traders, meanwhile, may do business with SIs to avoid the caps on dark trading that MiFID II introduces. European stocks that have had 8% or more of their volume traded on dark pools over the last 12 months will be banned from trading on dark venues for six months once MiFID takes effect.
Deutsche Bank and UBS Group revealed their intentions more than two months ago. Bloomberg, the parent of Bloomberg News, offers bond-trading systems, and services for transaction reporting and best execution to meet the new rules.