Brüssel, 15. April 2014 Märkte für Finanzinstrumente (MiFID II): Häufig gestellte Fragen A. Hintergrund, Hauptelemente und Kostenvorteile der Reform 1. Was ist MiFID und warum wurde sie erst vier Jahre nach ihrem Inkrafttreten überprüft. MiFID ist die Märkte für Finanzinstrumente (Richtlinie 200439EG 1). Sie hat die im Jahr 1993 verabschiedete Wertpapierdienstleistungsrichtlinie (ISD) ersetzt. Sie ist seit 2008 in Kraft. Es ist ein Eckpfeiler der EU-Regulierung der Finanzmärkte. Ziel ist es, die Wettbewerbsfähigkeit der EU-Finanzmärkte durch die Schaffung eines Binnenmarkts für Wertpapierdienstleistungen und - maßnahmen zu verbessern und einen hohen harmonisierten Schutz für Anleger in Finanzinstrumenten wie Aktien, Anleihen, Derivaten und verschiedenen strukturierten Produkten zu gewährleisten. Die MiFID hat in Europa einen größeren Wettbewerb in der Bereitstellung von Dienstleistungen für Investoren und zwischen Handelsplätzen gebracht. Dies hat dazu beigetragen, zu tieferen, integrierteren und liquiden Finanzmärkten beizutragen. Es hat auch die Kosten für Emittenten gesenkt, bessere und kostengünstigere Dienstleistungen für Investoren geleistet und zum Wirtschaftswachstum und zur Schaffung von Arbeitsplätzen in Europa beigetragen. Im Einklang mit dem angestrebten Ziel hat die MiFID zu einem wettbewerbsfähigeren und integrierten EU-Finanzmarkt beigetragen. Allerdings haben die vergangenen Jahre Ereignisse und Marktentwicklungen in einigen der Grundprinzipien der MiFID Schwachstellen gezeigt und die Bereiche, die Verstärkung oder Revision benötigen, hervorgehoben, zum Beispiel hat sie wohl zur Entwicklung neuer Handelsplattformen und - aktivitäten geführt, die außerhalb ihres Geltungsbereichs liegen Außerhalb von Vorschriften. Das Schließen einer solchen Lücke war notwendig, um das Vertrauen der Investoren zu stärken und alle ursprünglichen Ziele der MiFID zu erreichen. Die Sicherstellung eines robusteren Regulierungsrahmens wird auch dazu beitragen, die komplexere Marktwirklichkeit zu bewältigen, mit der wir uns konfrontiert sehen, eine Realität, die sich durch eine zunehmende Vielfalt an Finanzinstrumenten und neuen Handelsmethoden auszeichnet. Ähnliche Diskussionen fanden in den Vereinigten Staaten und anderen wichtigen globalen Finanzzentren statt und führten zu einer starken regulatorischen Antwort. 2. Was sind die wichtigsten Elemente der Reform MiFID II zielt darauf ab, ein sichereres, solideres, transparenteres und verantwortungsvolleres Finanzsystem zu schaffen, das für die Wirtschaft und die Gesellschaft als Ganzes arbeitet. Die wichtigsten Beiträge von MiFID II zur Erreichung dieser Ziele sind: (1) MiFID II führt ein Marktstrukturrahmen ein, das Schlupflöcher schließt und sicherstellt, dass der Handel, soweit angemessen, auf regulierten Plattformen stattfindet. Zu diesem Zweck unterzieht sie Aktien - und Nicht-Eigenkapitalinstrumente einer Handelsverpflichtung. Darüber hinaus ist sichergestellt, dass Wertpapierfirmen, die ein internes Matching-System betreiben, das Kundenaufträge in Aktien, Depositary Receipts, Exchange Traded Funds, Zertifikate und andere ähnliche Finanzinstrumente auf multilateraler Basis durchführt, als multilaterales Handelshaus (MTF) zugelassen werden müssen. Darüber hinaus führt sie einen neuen multilateralen Handelsplatz, die Organisierte Handelsfazilität (OTF), für Nicht-Eigenkapitalinstrumente ein, um auf organisierten multilateralen Handelsplattformen zu handeln. Diese Regeln sorgen für ein gleichmäßiges Spielfeld mit regulierten Märkten (RMs) und MTFs. Die Neutralität der OTF-Betreiber wird durch Beschränkungen der Nutzung des Eigenkapitals, einschließlich des abgestimmten Haupthandels, und der Diskretion in ihrer Ausführungspolitik gewährleistet. MiFID II führt eine Handelsverpflichtung für Aktien sowie eine Handelsverpflichtung für Derivate ein, die nach der europäischen Marktrichtlinie (EMIR) (MEMO12232) zollfähig sind und ausreichend liquide sind. Dies wird den Handel mit diesen Instrumenten auf multilaterale und gut regulierte Plattformen entsprechend den G20-Verpflichtungen verschieben. (2) MIFID II erhöht die Transparenz des Aktienmarktes und stellt zum ersten Mal ein Prinzip der Transparenz für Nicht-Eigenkapitalinstrumente wie Anleihen und Derivate dar. Für Aktien beschränkt ein Doppel-Cap-Cap-Mechanismus die Verwendung von Referenzpreis-Freistellungen und ausgehandelten Preis-Freistellungen (4 pro Veranstaltungsort Cap und 8 globale Cap) zusammen mit einer Voraussetzung für Preiserhöhung am Mittelpunkt für die ehemalige. Die großzügigen Verzichtserklärungen und die Befehle des Auftragsmanagements bleiben gleich wie bei MiFID I. MiFID II erweitert die Vor - und Nachhandels-Transparenzregelung auch auf Nicht-Eigenkapitalinstrumente, obwohl angesichts der Besonderheiten von Nicht-Eigenkapitalinstrumenten, Pre-Trade-Transparenz Freistellungen sind für große Aufträge, Anfrage für Zitat und Voice-Trading zur Verfügung. Die Transparenz des Posthandels erfolgt für alle Finanzinstrumente mit der Möglichkeit einer aufgeschobenen Publikation oder einer Volumenmaskierung. Es wurden auch Regeln festgelegt, um die effektive Konsolidierung und Offenlegung von Handelsdaten durch die Verpflichtung für Handelsplätze zu verbessern, Vor - und Nachhandelsdaten auf einer vernünftigen kommerziellen Basis zur Verfügung zu stellen und durch die Einrichtung eines konsolidierten Bandmechanismus für Post-Trade-Daten . Diese Regeln werden von der Erstellung eines anerkannten Berichtsmechanismus (ARM) und einer zugelassenen Publikationsvereinbarung (APA) für Handelsberichterstattung und Veröffentlichung begleitet. (3) Zur Erfüllung der G20-Verpflichtungen sieht die MiFID II verstärkte Aufsichtsbefugnisse und eine harmonisierte Positionsgrenze für Rohstoffderivate vor, um die Transparenz zu verbessern, die ordnungsgemäße Preisgestaltung zu unterstützen und Marktmissbrauch zu verhindern. Im Rahmen dieses Systems werden die zuständigen Behörden die Positionen gemäß einer von der Europäischen Wertpapieraufsichtsbehörde (ESMA) festgelegten Berechnungsmethode einschränken. Es führt auch eine Positionsberichterstattung nach Kategorie des Händlers ein. Dies wird den Regulierungsbehörden und den Marktteilnehmern helfen, bessere Informationen über das Funktionieren dieser Märkte zu erhalten. (4) Ein neuer Rahmen wird die Wettbewerbsbedingungen beim Handel und Clearing von Finanzinstrumenten verbessern. Dies ist für die Integration effizienter und sicherer EU-Kapitalmärkte unerlässlich. Zu diesem Zweck legt MiFID II eine harmonisierte EU-Regelung für den nichtdiskriminierenden Zugang zu Handelsplätzen und zentralen Kontrahenten (CCPs) fest. Mehrere Handelsplätze und neu gegründete CCPs werden von optionalen Übergangszeiten profitieren. Die nichtdiskriminierende Zugangsregelung gilt auch für Benchmarks für Handels - und Clearingzwecke. Übergangsregelungen sorgen für eine reibungslose Anwendung dieser Bestimmungen. (5) MiFID II führt Handelskontrollen für algorithmische Handelsaktivitäten ein, die die Handelsgeschwindigkeit drastisch erhöht haben und systemische Risiken verursachen können. Diese Schutzmaßnahmen beinhalten die Forderung, dass alle algorithmischen Händler ordnungsgemäß geregelt sind und Liquidität bei der Verfolgung einer Marktstrategie bieten. Darüber hinaus werden Wertpapierfirmen, die einen direkten elektronischen Zugang zu einem Handelsplatz erbringen, verpflichtet sein, Systeme und Risikokontrollen einzuhalten, um den Handel zu verhindern, der zu einem ungeordneten Markt beitragen kann oder Marktmissbrauch beinhaltet. (6) Ein stärkerer Anlegerschutz wird durch die Einführung besserer organisatorischer Anforderungen wie Client Asset Protection oder Product Governance erreicht, die auch die Rolle der Management-Gremien stärken. Das neue Regime sieht auch verstärkte Verhaltensregeln vor, wie etwa einen erweiterten Umfang für die Angemessenheitstests und verstärkte Informationen für die Kunden. Unabhängige Beratung unterscheidet sich eindeutig von der nicht unabhängigen Beratung und Einschränkungen werden auf den Erhalt von Provisionen (Anreize) verhängt. Die MiFID II führt auch harmonisierte Befugnisse und Bedingungen für die ESMA ein, um die Vermarktung und Verteilung bestimmter Finanzinstrumente unter klar definierten Umständen und ähnlichen Befugnissen für die Europäische Bankaufsichtsbehörde (EBA) bei strukturierten Einlagen zu verbieten oder zu beschränken. In Bezug auf verpackte Einzelhandels-Investmentprodukte (PRIPS) umfasst der neue Rahmen auch strukturierte Einlagen und ändert die Versicherungsvermittlungsrichtlinie (IMD), um einige Regeln für versicherungsbasierte Anlageprodukte einzuführen. (7) Die Vereinbarung stärkt die bestehenden Regelungen, um wirksame und harmonisierte Verwaltungssanktionen zu gewährleisten. Die Verwendung von strafrechtlichen Sanktionen ist so gestaltet, dass die Zusammenarbeit zwischen den Behörden und die Transparenz der Sanktionen gewährleistet ist. Ein harmonisiertes System der verstärkten Zusammenarbeit wird die effektive Erkennung von Missbräuchen von MIFID verbessern. (8) Eine harmonisierte Regelung für die Gewährung des Zugangs zu EU-Märkten für Unternehmen aus Drittländern beruht auf einer Äquivalenzbewertung von Drittstaatsgerichten durch die Kommission. Die Regelung gilt nur für die grenzüberschreitende Erbringung von Wertpapierdienstleistungen und Tätigkeiten, die professionellen und förderungswürdigen Gegenparteien zur Verfügung gestellt werden. Für eine Übergangszeit von drei Jahren und anhängige Äquivalenzentscheidungen der Kommission gelten weiterhin nationale Drittlandregelungen. 3. Wie werden die erwarteten Kosten und Nutzen von MiFID II MiFID II geschätzt, um Einmal-Compliance-Kosten zwischen 512 und 732 Millionen und laufenden Kosten zwischen 312 und 586 Millionen pro Jahr zu verhängen. Dies entspricht einer Auswirkung auf einmalige und laufende Kosten von nicht mehr als 0,15 der gesamten Betriebsausgaben im EU-Bankensektor. Dies ist nur ein Bruchteil der Kosten, die zum Zeitpunkt der Einführung der MiFID auferlegt wurden. Die einmaligen Kostenauswirkungen der Einführung der MiFID wurden auf etwa 0,6 Prozent (Einzelhandels - und Sparkassen) und 0,7 Prozent (Investmentbanken) der gesamten Betriebsausgaben geschätzt. Wiederkehrende Compliance-Kosten wurden auf etwa 0,1 Prozent (Einzelhandels - und Sparkassen) auf etwa 0,2 Prozent (Investmentbanken) der gesamten Betriebsausgaben geschätzt. Die wichtigsten Vorteile von MiFID II werden sehr greifbar sein, sind aber nicht leicht quantifizierbar. Die Vorteile eines verbesserten Spielfeldes, einer erhöhten Markttransparenz, einer besseren Transparenz gegenüber Regulierungsbehörden und stärkeren Befugnissen für Regulierungsbehörden, eines erhöhten Anlegerschutzes und der impliziten Vertrauensinvestoren auf den Finanzmärkten und einer Verringerung des Risikos und der damit verbundenen Auswirkungen Die finanzielle Stabilität der EU-Finanzmärkte sind echte Vorteile, auf denen es fast unmöglich ist, eine Zahl zu platzieren. B. Stärkere und effizientere Marktstrukturen 4. Wie werden Entwicklungen im Handel außerhalb der in MiFID II eingestuften Veranstaltungsorte behandelt. Wie wird der Handel mit standardisierten OTC-Derivaten behandelt. Ein Großteil des Handels, der derzeit außerhalb der MiFID-Veranstaltungsorte durchgeführt wird, Eine so genannte Over-the-Counter-Basis, findet auf Broker-Plattformen statt, die auf dem Markt tätig sind. Diese sind organisierte, nicht regulierte Plattformen, in denen Finanzinstrumente zunehmend gehandelt werden. Dies beeinträchtigt effektive Preisbildungsprozesse. MiFID II beschäftigt sich mit dieser Sorge in vielerlei Hinsicht. In Bezug auf Aktien unterliegt er Aktien einer Handelsverpflichtung. Darüber hinaus ist sichergestellt, dass Wertpapierfirmen, die ein internes Matching-System betreiben, das Kundenaufträge in Aktien, Depositary Receipts, Exchange Traded Funds, Zertifikate und andere ähnliche Finanzinstrumente auf multilateraler Basis durchführt, als multilaterales Handelshaus (MTF) zugelassen werden müssen. Bilaterale Transaktionen werden auf systematischen Internalishern durchgeführt. Für nonequities stellt MiFID II eine neue Plattform, eine organisierte Handelseinrichtung (OTF) vor. Ordnungsgemäß alle Arten organisierter Handel in diesen Instrumenten zu regeln und das Spielfeld in der EU zu erreichen. Dieser neue Veranstaltungsort unterliegt den gleichen Kernanforderungen für den Betrieb eines Handelsplatzes wie andere bestehende Plattformen. Es ist in einer breiten Art und Weise definiert, um alle Formen des organisierten Handels in Nichts zu erfassen, die nicht den vorhandenen Kategorien entsprechen. Der proprietäre Handel auf OTF wird nicht zulässig, außer für illiquide Staatsanleihen. Der abgestimmte Börsenhandel steht zur Verfügung, wenn die Kunden mit Zustimmung zu den Geschäften in Derivaten, die der Clearing-Verpflichtung gemäß EMIR unterliegen, zustimmen. Darüber hinaus verlangt MiFID II, dass alle standardisierten Derivate an organisierten und transparenten Veranstaltungsorten gehandelt werden, d. H. An geregelten Märkten, MTFs und OTFs. Infolgedessen wird der gesamte organisierte Handel, also der Handel, der in einem System stattfindet, der derzeit außerhalb von regulierten Veranstaltungsorten stattfindet, künftig an regulierten Orten durchgeführt werden. Systematische Internalisierer bilden auch einen Teil des Handels außerhalb der Plattformen. Sie sind Wertpapierfirmen, die ihre Kunden in einer organisierten Weise behandeln, also jeden Handel, der über Ad-hoc-Geschäfte hinausgeht. Um eine gleichberechtigte Wettbewerbsfähigkeit zu gewährleisten und die marktweite Preisfindung zu unterstützen, erweitert die MiFID II die spezifischen Transparenzregeln für Wertpapierfirmen, die als systematische Internalisierer (SIs) über Eigenkapitalinstrumente außer Aktien hinausgehen, für die SI-Transparenzregeln bereits im Rahmen von MIFID existierten I. Für Nicht-Aktien, einschließlich Anleihen, strukturierte Finanzprodukte, Emissionszertifikate und Derivate, die an einem Handelsplatz gehandelt werden und für die ein liquider Markt ist, werden auch neue Transparenzregeln für SI eingeführt. 5. Wie wird der Handel mit standardisierten OTC-Derivaten auf organisierte Veranstaltungsorte im Einklang mit den G20-Verpflichtungen verlagert Die G20-Verpflichtung besagt, dass alle standardisierten OTC-Derivatkontrakte an Börsen oder elektronischen Handelsplattformen gehandelt und gegebenenfalls durch zentrale Gegenparteien geklärt werden sollen Von 2012. Um diesem Engagement in Europa gerecht zu werden, muss der gesamte Handel mit Derivaten, die für das Clearing in Frage kommen und die ausreichend flüssig sind, entweder auf geregelte Märkte, multilaterale Handelseinrichtungen oder auf die neuen organisierten Handelsplätze (OTFs) Die Europäische Wertpapieraufsichtsbehörde (ESMA) bewertet und ermittelt, wann ein dem Clearing zuschussfähiges Derivat ausreichend liquide ist, um ausschließlich an diesen Handelsplätzen gehandelt zu werden. Entsprechende Kriterien für eine solche Bewertung müssen von der ESMA berücksichtigt werden. Dieser Ansatz sollte pragmatisch und progressiv genug sein, um die Handelsspezifitäten jedes Derivats bei der Erfüllung der G20-Verpflichtung zu berücksichtigen. 6. Was wird vorgeschlagen, Clearing und Zugang zu Post-Trade-Infrastrukturen Die Frage auf dem Spiel steht über Wettbewerb, Stabilität und Integration von EU-Marktinfrastrukturen. Obwohl das vertikale Integrationsmodell der Handels - und Post-Trading-Infrastrukturen in Bezug auf die Koordination Vorteile bieten kann, kann es auch zu Ineffizienzen in Bezug auf Wettbewerb und Preistransparenz führen. Die Einführung von nichtdiskriminierenden Zugangsanforderungen in der Verordnung über OTC-Derivate, zentrale Gegenparteien und Handelsregister (bekannt als EMIR - European Market Infrastructure Regulation siehe MEMO12232) ist eine Antwort auf diese potenziellen negativen Auswirkungen. Während EMIR nur OTC-Derivate umfasst, deckt MiFID II alle Finanzinstrumente ab. Trading-Locations werden erforderlich sein, um den Zugang, einschließlich der Daten-Feeds auf nichtdiskriminatorischer Basis für zentrale Gegenparteien (CCPs), die Transaktionen, die am Handelsplatz durchgeführt werden, zu löschen, und CCPs werden verpflichtet sein, Transaktionen, die an verschiedenen Handelsplätzen durchgeführt werden, Gut definierte Bedingungen erfüllt sind. Dies ist zum Beispiel, dass die Zugangsvereinbarung keine Interoperabilitätsanordnung erfordert (die Anforderung kann nicht auf die CCPs, die sie anschließen und grenzüberschreiten müssen, im Falle von börsengehandelten Derivaten auferlegt werden, und dass sie die glatte und geordnete nicht bedrohen Funktion des Marktes, insbesondere aufgrund der Liquiditätsfragmentierung. Die Frage der Fungibilität wird weiter geklärt werden: d. H. In welchen Fällen können Verträge verrechnet oder quer marginalisiert werden. Diese Regeln sind notwendig, um sicherzustellen, dass die KPCh den Zugang nicht in unerlaubter Weise verweigern können, und zwar unter Bezugnahme auf die Abwesenheit von Fungibilität und bietet gleichzeitig mehr Klarheit darüber, wann die KPCh die Netto - oder Marge überschreiten sollten. Um die Übereinstimmung mit den Zugangsbestimmungen unter EMIR zu gewährleisten, die OTC-Derivate abdeckt, wurde vereinbart, die Anforderungen anzupassen, damit die regulatorischen technischen Standards für MIFIR und EMIR gleich sein sollten. Übergangsregelungen wurden in Bezug auf börsengehandelte Derivate eingeführt. Die Kommission sollte sechs Monate vor der Eintragung in Frage stellen, ob börsengehandelte Derivate aus dem Geltungsbereich (für einen Zeitraum von höchstens 30 Monaten) auf der Grundlage einer Risikobewertung ausgeschlossen werden sollten. Wenn es feststellt, dass es keinen Grund gibt, sie auszuschließen, können CCPs oder Handelsplätze bei der zuständigen Behörde weiterhin verlangen, dass sie nicht unter die Zugangsverpflichtung (wieder 30 Monate Übergang) unter Berücksichtigung systemischer Risiken sind. MiFID II sorgt auch für einen nichtdiskriminierenden Zugang zu Benchmarks, auf denen einige Derivate gebaut werden. Für neue Benchmarks beginnt die Verpflichtung 30 Monate nach dem ersten Gebrauch. Gemeinsam werden diese Regeln diskriminierende Praktiken verhindern und helfen, Barrieren zu beseitigen, die den Wettbewerb beim Clearing von Finanzinstrumenten behindern. Infolgedessen können bestehende oder neue Anbieter in der Lage sein, um die Bereitstellung von Handels - oder zentralen Clearing-Dienstleistungen zu konkurrieren. Um sicherzustellen, dass die Belastungen eines neuen regulatorischen Umfelds in verhältnismäßiger Weise abgebaut werden, für börsengehandelte Derivate und Handelsplätze, die unter die relevanten Schwellenwerte fallen, und für übertragbare Wertpapiere können neu eingerichtete CCPs eine Übergangszeit von 30 Monaten in Anspruch nehmen . 7. Wie ist die Notwendigkeit, den Zugang der KMU zu den Kapitalmärkten zu verbessern, berücksichtigen kleine und mittlere Unternehmen (KMU) in ganz Europa einen wesentlichen Beitrag zum Wirtschaftswachstum, zur Beschäftigung, zur Innovation und zur sozialen Integration. Zwei Hauptquellen der Finanzierung für solche Unternehmen sind private Finanzierungen durch Banken oder andere Institutionen und die Finanzierung durch Kapitalmärkte (z. B. die Ausgabe von Aktien). Die KMU-Märkte zielen darauf ab, kleineren, wachsenden Unternehmen eine Plattform zu bieten, um Kapital sowohl durch Erstausgaben als auch durch laufende Geldbeschaffungen zu erhöhen. Doch nicht alle diese Märkte waren erfolgreich. Um einen besseren Zugang zu den Kapitalmärkten für KMU zu ermöglichen, führt MiFID II ein spezielles Label für KMU-Märkte ein, indem es im Rahmen eines MTF einen neuen, maßgeschneiderten Markt für KMU schafft. Die Eintragung dieser Märkte sollte ihre Sichtbarkeit und ihr Profil erhöhen und zu gemeinsamen europaweiten Regulierungsstandards führen, die auf die Bedürfnisse von Emittenten und Investoren in diesen Märkten zugeschnitten sind, wobei ein hohes Investorenschutzniveau beibehalten wird. Dies wird auch ein Qualitätslabel für Plattformen bieten, die darauf abzielen, die Bedürfnisse der KMU zu erfüllen. C. Unter Berücksichtigung der technologischen Innovation 8. Wie wurden Fragen durch algorithmischen und hochfrequenten Handel angegangen Algorithmischen Handel ist eine Form des Handels, wo ein Computer-Algorithmus automatisch beschließt, einen Auftrag mit minimalem oder keinem menschlichen Eingriff zu platzieren. Eine wichtige Form des algorithmischen Handels ist der Hochfrequenzhandel, wo ein Handelssystem den Markt mit hoher Geschwindigkeit analysiert und dann sehr viele Aufträge sehr schnell sendet. MiFID II führt eine Reihe von Schutzmaßnahmen sowohl für Marktteilnehmer ein, die Algorithmen als Teil ihrer Handelsstrategien verwenden, sowie an Handelsplätzen, in denen algorithmischer und hochfrequenter Handel stattfindet: (1) Informationsanforderungen von Regulatoren über die Strategien verschiedener algorithmischer Händler Wird verstärkt, und es werden strengere Kontrollen auf Arrangements verhängt, bei denen Mitglieder von Handelsplätzen anderen Firmen erlauben, die Algorithmen nutzen, um über ihre Systeme (direkten elektronischen Zugang) auf öffentliche Märkte zuzugreifen. Derzeit wissen die Regulierungsbehörden nicht, welche Arten von Strategien verwendet werden, durch welche Strategie ein Auftrag generiert wird, und die Mitglieder können nicht überprüfen, welche Art von Strategien die Personen, die ihre Systeme verwenden und wie diese Personen ihre Strategien kontrollieren. (2) Algorithmische Händler müssen als Investmentfirma registriert sein und haben wirksame Systeme und Risikokontrollen vorhanden. Wenn sie sich in einer marktführenden Strategie engagieren, müssen sie Zitate zu wettbewerbsfähigen Preisen posten, um regelmäßig Liquidität bereitzustellen, die zu einem geordneteren Handel beitragen wird. (3) Handelsplätze werden auch erforderlich sein, um robuste Kontrollen gegen Probleme wie ungeordneten Handel, unregelmäßige Preisbewegungen und Kapazitätsüberlastung zu haben. Um diese zu mildern, werden Einschränkungen, wie weit die Veranstaltungsorte bei der Gewinnung des Auftragsflusses konkurrieren können, zum Beispiel durch die Verringerung der Größe, durch die die Preise steigen oder fallen (Tickgröße) oder durch die Gestaltung ihrer Gebührenstrukturen, verhängt werden können. (4) Schließlich verlangt MiFID II, dass der Handel im Falle von erheblichen Preisbewegungen (Leistungsschalter) auf harmonisierte Weise in der Lage sein wird, den Handel zu stoppen. D. Erhöhte Transparenz 9. Was sind die Vorschläge zur Verbesserung der Transparenz des Aktienmarktes, einschließlich der Frage der dunklen Pools In allen Märkten müssen die Käufer wissen, was die Verkäufer fragen und umgekehrt. Großhandelsgeschäfte werden jedoch häufig zu nichtöffentlichen Preisen durchgeführt. Gleiches gilt für Finanzinstrumente. Daher sind dunkle Pools oder Plattformen, in denen Handelsinteressen ohne vollständige Vorhandels-Offenlegung für andere Nutzer oder die Öffentlichkeit interagieren, ein gemeinsames Merkmal der Finanzmärkte. MiFID II fährt fort, Freistellungen von der Vorhandelstransparenz zuzulassen, aber nur solange sie keine Wettbewerbsverzerrungen verursachen und die Gesamteffizienz des Preisfindungsprozesses verringern. Finanzaufsichtsbehörden können Freistellungen von Transparenzverpflichtungen gewähren für: (i) Transaktionen, die im Vergleich zur normalen Marktgröße (große Größengrenzen) groß sind (ii) Systeme, in denen der Preis anhand eines Preises ermittelt wird, der von einem anderen System erzeugt wird (Referenz Preisverzichtungen) (iii) Systeme, die ausgehandelte Transaktionen formalisieren, vorausgesetzt, dass sie bestimmte Kriterien erfüllen (ausgehandelte Preisverzichtungen) (iv) Aufträge in einer Auftragsverwaltungseinrichtung des Handelsplatzes bis zur Offenlegung (Auftragsverwaltungsverzicht). Um jegliche negativen Auswirkungen auf den Preisbildungsprozess zu vermeiden und um sicherzustellen, dass der Handel mit Aktien auf transparenten geregelten Orten möglichst möglich erfolgt, unterliegt die Verwendung von Freistellungen bestimmten Einschränkungen. MiFID II führt einen doppelten Volumen-Cap-Mechanismus ein, der die Verwendung von Referenzpreis-Freistellungen und ausgehandelten Preis-Freistellungen (4 pro Veranstaltungsort und 8 globale Cap) begrenzt. Darüber hinaus unterliegt die Verwendung der Referenzpreisverzichtung einem Preisverbesserungsmechanismus, d. h. die Aufträge müssen am Mittelpunkt innerhalb der aktuellen Angebots - und Angebotspreise des Handelsplatzes abgeglichen werden. Wenn der Mittelpunkt nicht verfügbar ist, können die Aufträge zum offenen oder schließenden Preis der jeweiligen Handelssitzung abgeglichen werden. Diese Beschränkungen gelten nicht für Freistellungen für Großhandelsgeschäfte, da sie Investoren, die große Mengen an Aktien verkaufen, schützen (noch gelten sie für Auftragsverwaltungseinrichtungen). Um den Großauftrag zu veröffentlichen, würde der Markt den Markt verschieben, was bedeutet, dass sie zu schlechteren Preisen verkaufen würden. Die spezifischen Bedingungen, unter denen die Freistellungen funktionieren, werden, wie für Aktien heute, in Durchführungsmaßnahmen festgelegt. Schließlich erweitert MiFID II die Transparenzregelung auf umsetzbare Angabe von Interessen, Eigenkapitalinstrumente außer Aktien, einschließlich Depositary Receipts, Exchange Traded Funds und Zertifikate. Die geltenden Transparenzregeln für systematische Internalisierer gelten weiterhin für Aktien, während neue Rückstellungen für aktienähnliche Instrumente (wie Depositary Receipts, ETFs (Exchange Traded Funds), Zertifikate) eingeführt werden. 10. Ist die Einführung eines obligatorischen konsolidierten Bandes für Handelsdaten in Betracht gezogen Die Berichterstattung, Veröffentlichung und Konsolidierung von Handelsdaten müssen aufgrund von Problemen mit Formatierung, Kosten, Qualität und Zuverlässigkeit angesprochen werden. Handelsdaten helfen Investoren, den richtigen Preis zu finden, wenn sie zu kaufen oder zu verkaufen, und zu überprüfen, ob sie den besten Preis erhalten, indem sie den Preis vergleichen, den sie mit anderen Marktpreisen bekommen haben. MiFID II verbessert die Situation durch die Einführung von Maßnahmen zur Sicherstellung der Datenqualität und - konsistenz sowie Maßnahmen zur Senkung der Datenkosten. Eine obligatorische konsolidierte Band, die eine konsistente und zuverlässige Aufzeichnung von ausgeführten Trades bietet, wird von Datenanbietern eingerichtet, die dazu berechtigt sind, dies unter harmonisierten Standards zu tun, die in der MiFID festgelegt sind. Auf der Grundlage dieser Handelsdaten für die gesamte EU werden die Anleger in der Lage sein, eine fundiertere Wahl zu treffen. 11. Wie werden die Vor - und Nachhandels-Transparenzanforderungen über die Aktien hinaus verlängert und warum die MiFID derzeit nur auf Aktien, die zum Handel an geregelten Märkten zugelassen sind, harmonisierte Vor - und Nachhandels-Transparenzanforderungen vorsieht. Die MiFID II führt solche Anforderungen auch für andere Instrumente ein, dh für Eigenkapitalinstrumente außer Aktien, die zum Handel an geregelten Märkten zugelassen sind (Depositary Receipts, Exchange Traded Funds, Zertifikate etc.) und Noquities (Anleihen, strukturierte Finanzprodukte, Emissionszertifikate und Derivate, die gehandelt werden An einem Handelsplatz). Aufgrund der unterschiedlichen Struktur der Märkte für Nicht-Eigenkapitalinstrumente im Vergleich zu denen in Aktien ist das genaue Transparenzregime für verschiedene Arten von Instrumenten und Handelsmodellen kalibriert. Wafer werden für Großaufträge, Aufträge in einer Auftragsverwaltungseinrichtung, Derivate, die nicht der Handelsverpflichtung unterliegen, und für Nichtqualitätsinstrumente, für die es keinen liquiden Markt gibt, zur Verfügung stehen. Verzichtserklärungen können auch für Anhaltspunkte für das Anforderungs-for-Quote - und Sprachhandelssystem gewährt werden, die über einer für das Instrument spezifischen Größe liegen, die Liquiditätsanbieter einem unangemessenen Risiko aussetzen würde. In diesem Fall veröffentlicht der Handelsplatz zumindest indikative Pretrade-Angebots - und Angebotspreise. Pretrade-Transparenzanforderungen sollen in Durchführungsmaßnahmen weiter festgelegt werden. Post-Trade-Anforderungen, die im Rahmen der Durchführungsbestimmungen detailliert festgelegt werden, gelten für alle Anleihen und strukturierten Finanzprodukte sowie alle an einem Handelsplatz gehandelten Derivate. Die Veröffentlichung der Einzelheiten der Transaktionen kann unter vorgeschriebenen Umständen erfolgen. Vorhandelsanforderungen, die auch in der Durchführungsregelung näher erläutert werden, werden für Eigenkapitalinstrumente wie Instrumente und Nichtqualitätsinstrumente verhängt, wenn sie von Wertpapierfirmen angeboten werden, die als systematische Internalisierer im Freiverkehr handeln. Der Grund für die Einführung von Vor - und Nachhandels-Transparenzanforderungen für diese Instrumente ist, dass das Fehlen harmonisierter Transparenzanforderungen in diesen Märkten von vielen, einschließlich EU-Wertpapieraufsichtsbehörden, von einer ineffizienten und unlauteren Preisbildung und höheren Risiken erkannt wurde Als es sonst der Fall wäre. 12. Ist MIFID II der Beginn der Preisregulierung im Bereich der Marktdaten. Die Marktteilnehmer benötigen Daten über Handelsaktivitäten, Preise und Volumen, um Entscheidungen darüber zu treffen, wie und wann sie investieren sollen. Die Daten sollten auf gleicher und leicht zugänglicher Basis zur Verfügung stehen. Gegenwärtig bestehen verschiedene Anreize für Datenanbieter und Lieferanten, ihre Daten zu Raten oder in einer Weise zu verkaufen, die nicht der angemessenen kommerziellen Basis entsprechen oder die einfache Konsolidierung von Daten mit ähnlichen Daten aus anderen Quellen, die MiFID vorsah. MiFID II liefert diese Ziele. Durch die Umsetzung der Rechtsvorschriften wird weiter festgelegt, was eine angemessene kommerzielle Grundlage darstellt, um die Regelung wirksam zu machen. E. Verstärkte Aufsichtsbefugnisse und ein strengerer Rahmen für Rohstoffderivatmärkte 13. Wie wird MIFID II Rohstoffderivate regeln Zuerst wurden Emissionszertifikate in den Anwendungsbereich von MIFID gebracht (siehe Frage 14 unten) und die Definition eines Finanzinstruments wurde erweitert Um Rohstoffverträge einzubeziehen, die physisch abgewickelt werden können, die an MIFID-Handelsplätzen gehandelt werden, einschließlich der neu gegründeten OTF. Bestimmte Befreiungen gelten jedoch für Energieverträge (siehe Frage 15 unten) Zweitens werden weniger Rohstofffirmen von der MiFID II befreit, wenn sie auf eigene Rechnung in Finanzinstrumenten tätig sind oder im Rahmen ihrer Hauptinvestitionen Wertpapierderivate anbieten Geschäft und wenn es sich nicht um Tochtergesellschaften von Finanzgruppen handelt. Eine neue Regelung verkleinert die bestehenden Ausnahmen im Interesse einer größeren Regulierungsaufsicht und Transparenz unter Berücksichtigung der Notwendigkeit von Fortsetzungsbefreiungen für Handelsunternehmen und der Risiken, die diese Spieler ausüben. Drittens sieht die MiFID II verstärkte Aufsichtsbefugnisse und eine harmonisierte Positionsbegrenzung für Rohstoffderivatmärkte vor, um die ordnungsgemäße Preisgestaltung zu unterstützen und Marktmissbrauch zu verhindern. Dies wird den Regulierungsbehörden und den Marktteilnehmern helfen, bessere Informationen über das Funktionieren dieser Märkte zu erhalten. Harmonisierte und umfassende Befugnisse werden den Finanzaufsichtsbehörden zur Überwachung und Intervention in jedem Stadium der Handelsaktivitäten in allen Warenderivaten gewährt, einschließlich in Form von Positionsgrenzen, die gemäß der ESMA-Methodik für die Berechnung festgelegt werden, wenn Bedenken hinsichtlich der Marktintegrität oder ordnungsgemäß bestehen Funktionsweise der Märkte Veranstaltungsorte, die den Handel mit Rohstoffderivaten anbieten, müssen auch geeignete transparente und nichtdiskriminierende Positionsmanagement-Kontrollen auf ihren Plattformen übernehmen, Positionen platzieren und erforderlichenfalls den Inhabern auffordern, Positionen zu reduzieren oder zu beenden oder Liquidität wieder in den Markt zu bringen. Einzelheiten dieser Kontrollen müssen der ESMA mitgeteilt werden. MIFIF II erhöht die Transparenz der Handelsaktivitäten an allen organisierten Handelsplätzen durch die Einführung einer Positionsberichterstattung nach Kategorie des Händlers. Diese harmonisierten und mehr disaggregierten Informationen helfen Regulierungsbehörden und Marktteilnehmern, die Rolle der Finanzströme in diesen Märkten besser zu beurteilen. Darüber hinaus werden die Vor - und Nachhandels-Transparenzanforderungen auf Derivate ausgedehnt, die an Handelsplätzen gehandelt werden, darunter auch Rohstoffderivate. Auch der obligatorische Handel an organisierten Veranstaltungsorten gilt für Rohstoffderivate. 14. Warum sind Emissionszertifikate jetzt in den Geltungsbereich der MiFID und der Marktmissbrauchsrichtlinie einbezogen. Der Handel mit Zertifikatderivaten fällt bereits in den Anwendungsbereich der MiFID und der Marktmissbrauchsrichtlinie (IP14424). Indem die Emissionszertifikate unter demselben Rahmen, der Verordnung über den Emissionszertifikathandel (EUA), stattfinden, wird der Spotmarkt mit dem, was auf den EUA-Derivatemarkt anwendbar ist, abgestimmt. Gemeinsam bieten die MiFID und die Regeln zum Marktmissbrauch einen umfassenden Rahmen für den Handel mit Finanzinstrumenten und die Integrität des Marktes. Die Ausweitung auf EUAs wird eine größere Sicherheit für die Händler von EUAs einführen, ohne den Marktzweck zu beeinträchtigen, der Emissionsminderung bleibt. 15. Welche Energieverträge werden von der MiFID II abgedeckt, die ausgeschlossen sind und warum der Kommissionsvorschlag als Finanzinstrumente alle Rohstoffverträge, die an irgendeiner Art von Handelsplatz gehandelt werden, einbeziehen kann und die physisch abgewickelt werden kann, um im Rahmen von MiFID II zu liegen. Denn diese Instrumente sind wirtschaftlich gleichwertig mit Finanzinstrumenten und können wie Finanzinstrumente eingesetzt werden und ähnliche Risiken darstellen. However the final text excludes wholesale energy contracts covered under the Regulation on the integrity and transparency of the market wholesale energy (REMIT) because these contracts are subject to a certain level of regulation and supervision comparable with financial markets legislation and so their exclusion is justified as a proportional amendment to avoid unnecessary dual regulation. Oil and coal physically settled contracts are not however subject to similar legislation and so will be included as financial instruments for the purposes of MiFID II and therefore subject, amongst other things, to position limits and transparency requirements. However, many of these contracts are not currently cleared and so to ensure a smooth transition, the application of EMIR provisions to these physically settled oil and coal contracts traded on an OTF are deferred. The EMIR provisions will not apply for six years after the entry into force of MiFID II. This transition period can be extended once by two years and once by one year. Before taking any decision on the extension or non-extension of this initial transition period by two years, the Commission will have to assess the potential impact on the energy prices as well as the benefits in terms of reducing counterparty and systemic risks and if necessary propose legislative solutions. F. Reinforced supervisory powers and a stricter framework for commodity derivative markets 16. What role will ESMA play in relation to the revised MiFID ESMA already plays an important role in advising the Commission on possible regulatory changes and in ensuring convergent application of the rules across Member States. Many of the proposed changes in MiFID II stem from advice received from ESMA, and it is foreseen that it will play a major part in developing most of the technical implementing measures necessary to ensure the full functioning of the regulatory framework. In terms of specific supervisory tasks, ESMA has an increased role in, for example, determining the conformity with MiFID II of individual cases where venues propose to waive pre-trade transparency (dark pools). In accordance with the mandate defined in the ESMA regulation and in line with ESMA powers conferred in the Regulation of 14 March 2012 on short selling and certain aspects of credit default swaps ( MEMO11713 ), it will also take any steps necessary to coordinate actions by national competent authorities with regard to waivers from pretrade transparency, products considered risky from the point of view of investor protection or financial stability as well as positions in commodity derivatives by specific market participants deemed excessively large. 17. What purpose does transaction reporting serve and what measures are being proposed Investment firms have to report all their trades to competent authorities (in all financial instruments that are admitted to trading on a regulated market or MTF as well as those traded on an MTF or OTF). This obligation also applies to financial instruments where the underlying is a financial instrument traded on a trading venue, an index or a basket composed of financial instruments traded on a trading venue. This means that the reporting obligation applies regardless of where the trade takes place. This system of transaction reporting enables supervisors to monitor the activities of investment firms, which helps them to ensure compliance with MiFID II, and to monitor for abuses under the Market Abuse Regulation. Because transaction reporting mainly serves the purposes of supervision, the requirements under MiFID II mirror the scope of the Market Abuse Regulation. To this end, MiFID II extends the scope of transaction reporting to all financial instruments, with the exception of instruments which are not susceptible to or could not be used for market abuse. Second, reporting requirements today diverge between Member States, which adds costs for firms and limits the use of trade reports for competent authorities. By including the reporting requirements in MiFIR, the requirements are further harmonised, notably the information that identifies who is trading and for whom a trade is being executed. Also, ESMA is empowered to propose technical standards on a common European transaction reporting format and content. Finally, for cost and efficiency purposes, double reporting of trades under MiFID II and the reporting requirements to trade repositories should be avoided. MiFID II proposes that a trade already reported to a repository will not need to be reported again under MiFID II, provided all the necessary information is thereby available to competent authorities. G. Stronger investor protection 18. How will MiFID II better protect investors MiFID includes a number of measures aimed at protecting investors in the context of the provision of investment services. Those rules take into account the type of services (for instance, investment advice or execution of orders) and the classification of clients, with higher protection granted to retail clients. The MiFID rules include both conduct of business requirements (for instance, collecting sufficient information to ensure that the products provided are suitable or appropriate for the client) and organisational requirements (for instance, requirements to identify and manage any conflicts of interest). However, modifications and improvements are introduced to strengthen the framework for the provision of services. First, the scope of the Directive is broadened in order to cover financial products outside the scope of MiFID I but which satisfy similar investor needs and raise comparable investor protection challenges. In the future, the sale of structured deposits will have to comply with several MiFID requirements, and in particular with conduct of business and conflicts of interest rules. MiFID II will also extend some of the information to clients and conflict of interest requirements to insurance-based investment products by amending the Insurance Mediation Directive 200292EC. Second, conduct of business requirements are modified in order to grant additional protection to investors. The rules for investment advice are improved both when advice is provided on an independent basis and in the long term. Advisers declaring themselves as independent will need to match the clients profile and interests against a broad array of products available in the market and say whether they will provide the client with a periodic assessment of the suitability of advised products. Independent investment advisers and portfolio managers will be required to transfer all fees, commissions or any monetary benefits paid or provided by a third party to the client who should be accurately informed about all such commissions. The conditions for services where investors receive less protection from firms are more limited. In particular, the Directive clarifies the conditions and situations in which investors are able to transact freely in certain non-complex instruments with minimal protection afforded by investment firms. Third, organisational requirements for the provision of services to investors are strengthened. For instance, the involvement of senior management in the design of the firms policies as to how products and services may be sold or provided to their clients and the adoption of adequate internal controls is consolidated. Also, MiFID II introduces harmonised powers and conditions for national competent authorities, the European Securities and Markets Authority (ESMA) and the European Banking Authority (EBA) to prohibit or restrict the marketing and distribution of certain financial instruments and structured deposits, financial activities or practices in case of threats to investor protection, financial stability or the orderly functioning of markets. 19. Will UCITS be included under MiFID as a result of the MiFID review Will the classification of some UCITS as complex instruments change their status under the UCITS directive Shares or units in UCITS (Undertakings for Collective Investments in Transferable Securities) are financial instruments and therefore investment services relating to them are already fully covered under MiFID. The issue which is addressed in the MiFID review concerns their classification as complex or non-complex instruments. The distinction is relevant in order to establish the application of the execution-only regime, under which investment firms or banks selling certain instruments are subject to less stringent rules for the protection of retail investors. In particular they are not obliged to assess whether the client has the knowledge and experience to understand the financial instrument the so-called appropriateness test. The execution only regime only applies to non-complex financial instruments. So far, all UCITS have been classified as non-complex instruments. In the meantime, however, certain UCITS have become more complex and the UCITS legislation itself reflected the separate and distinct characteristics of such structured UCITS which, on account of their pay-off formula raise additional challenges for investors to understand how they operate. For this reason - for the mere purpose of the execution only regime - MiFID II maintains the general classification of UCITS as non-complex instruments but it introduces the exception of structured UCITS which will now be treated as complex instruments for the purposes of the execution-only regime. The objective is to ensure that investment firms will be obliged to request information on their clients knowledge and experience, in order to assess the appropriateness of these instruments for them. H. MIFID II and relation with other pieces of financial regulation, choice of legal instruments 20. How does the revision of MiFID fit with other European legislation, such as the Market Abuse Directive, Over-the-Counter derivatives, short-selling, and Packaged Retail Investment Products (PRIPs) The revision of the Market Abuse Directive (MAD) and MiFID has been considered at the same time because together they guarantee the competitiveness, efficiency and integrity of EU financial markets. In order to ensure that they are fully coherent and support each others objectives and principles, they needed to be updated in tandem. Moreover, the pan-EU competition facilitated by MiFID has given rise to new challenges in terms of cross-border supervision, and maximum harmonisation of the rules and competent authorities powers in relation to offences are a necessary step. MiFID applies to the provision of investment services or activities by banks and investment firms in relation to financial instruments and to the operation of regulated markets. The objective is to support the development of a more integrated, competitive and efficient EU market in financial instruments with appropriate rules regarding conditions for authorisation as investment firms, organisational requirements to ensure they are managed appropriately, market transparency and investor protection. The Regulation on OTC derivatives, central counterparties and trade repositories (EMIR) on the one hand, and the Regulation on short-selling and credit default swaps on the other, have different objectives and therefore complement MiFID. The former aims to minimise counterparty credit risk and operational risk, while the latter increases harmonisation and transparency, and mitigates risks associated with short selling and the use of credit default swaps. Packaged retail investment products (PRIPs) are common products in the retail investment market, with broadly comparable functions for investors while taking a variety of legal forms. While offering benefits for investors, PRIPs are often complicated and opaque. In line with the Regulation to improve the quality of information that is provided to consumers ( MEMO14299 ), MiFID II addresses some of the problems identified in the PRIPs market by creating a robust and coherent framework in the areas of information about the product to clients and the rules governing the sales process for those PRIPs that are financial instruments or structured deposits, such as the conduct of business and the conflicts of interest requirements for intermediaries distributing these products. At the same time, the measures on product disclosure proposed in the PRIPs context complement the investor protection measures on investment advice and sales services regulated under MiFID. 21. Why are some elements of MiFID placed in a directive and others in a regulation Which parts will be in which instrument As in other pieces of EU financial services regulation, the split reflects the need to achieve a uniform set of rules in some areas, while allowing for national specificities in others. The De Larosire report highlighted that one of the problems leading to the crisis was an inconsistent implementation of financial services rules leading to a fragmented internal market. As a result, a Regulation (MiFIR) sets out requirements on: the disclosure of data on trading activity to the public and transaction data to regulators and supervisors the mandatory trading of derivatives on organised venues removing barriers between trading venues and providers of clearing services to ensure more competition, and specific supervisory actions regarding financial instruments and positions in derivatives. Such a harmonised approach will help avoid confusion in the daily functioning of markets, and minimise opportunities for harmful regulatory arbitrage between Member States. The Directive (MiFID) amends existing provisions on authorisation and organisational requirements for providers of investment services, and all rules regarding investor protection, including for firms located in third countries but actively engaged in EU markets. Also, the Directive specifies requirements in relation to the authorisation and organisational rules applicable to different types of trading venues, providers of market data and other reporting services, as well as the complete powers to be granted by Member States to national competent authorities, including the framework of sanctions for breaches of the rules. These provisions are best situated in a Directive to account for differences in national markets and legal structures as well as the profile of local investors. I. MIFID and international issues 22. How is the treatment of firms and market operators from outside the EU being considered The access of third country firms to the EU markets was not harmonised under MiFID I. Each Member State could introduce its own third country regime, subject to the general principles of the EU Treaties and provided that national provisions did not result in treatment more favourable than that given to the EU firms. In order to overcome the existing fragmentation and to ensure a level playing field in the EU for third country firms, MiFID II introduces a harmonised third country equivalence regime for the access of third country investment firms to the EU when providing services to professional clients per se and eligible counterparties. The access will be preceded by an equivalence decision taken by the Commission. Third country firms for which a decision is adopted will be able to request to provide services in the EU, without having to establish a branch in a Member State. For three years after the equivalence decision is made, Member States are allowed to apply national rules for provision of services and activities by third country investment firms. Likewise, as long as an equivalence decision is not taken, thirdcountry firms will continue to operate in Member States according to national regimes but will not benefit from the EU passport (they will not be able to provide services to professional and eligible counterparties in the entire EU). The equivalence process for a specific third country is initiated by the Commission but Member States can indicate their interest that a specific jurisdiction(s) is subject to the equivalence assessment. The equivalence assessment is outcome based (not line-by-line) and it means that the Commission will be looking into whether the third-country regulatory (prudential and business conduct requirements) and supervisory framework achieves the same objectives as the EU legislation. The third-country framework needs to provide for an effective equivalent system for the recognition of investment firms authorised under third-country legal regimes. Once the Commission has adopted an equivalence decision with respect to a specific third-country and that ESMA has established cooperation arrangements with the competent authorities of that third-country, the operators from that third-country will simply have to submit an application with ESMA and once registered with ESMA they will freely provide services to professional clients per se and eligible counterparties. With respect to provision of services by third country firms to retail clients, Member States will continue to apply national rules. The Commission regrets that there is not a fully EU harmonised third-country regime for retail clients but understands that the specificities and the increased level of protection for retail clients may also justify why Member States wished to maintain their national regimes. However, where Member States have chosen to require that third-country firms intending to provide investment services to retail clients establish a branch in their territory, the Directive harmonises the requirements (core organisational and conduct of business rules) with which the branch of a third-country firm will have to comply in order to be authorised by the competent authority of a Member State, but that branch will not have the right to provide services to retail clients in other Member States. In this sense, by third-country firms should see this as a positive step forward as it reduces divergences across EU Member States and therefore the legal and regulatory costs for third-country operators. In addition, MiFID II will not apply when investment services are provided at the exclusive initiative of EU clients. This exemption will apply only to the service or activity initiated by the client. An initiative by the client shall not entitle the thirdcountry firms to market new categories of investment products or services to that client and still benefit from the above exemption. 23. How does MiFID II compare to what other jurisdictions in the world are doing, in particular the United States MIFID II is the legislation through which the EU has implemented a number measures to meet our G20 commitments, in particular in relation to derivatives and is in line with the principles of regulation established by the International Organisation of Securities Commissions (IOSCO). This helps ensure convergence with other jurisdictions, including the US, Australia, Asia, and South America. Other jurisdictions are at different stages in the process of implementation, with some further advanced than others. Many provisions of MiFID II reflect core precepts in the regulation of securities markets globally. However, different jurisdictions have rules specific to their own markets. Assessments of comparability, as is the case under equivalence assessments for third-country recognition, should not be made on a line-by-line basis but rather look at the totality of the relevant legislation in terms of achieving the relevant objectives. As regards the US, MiFID II covers areas addressed by various pieces of US financial markets regulation such as the Securities Exchange Act and the Commodity Exchange Act. Like the Dodd-Frank Act, which amends these texts, the review of MiFID both amends provisions already in force and adds measures in light of the financial crisis and other market developments. The US and EU approaches and legislation are very much aligned in terms of achieving the same objectives. For example, the revised MiFID complements the regulation on OTC derivatives, central counterparties and trade repositories (EMIR). For more information: The MiFID regulatory framework consists of a framework Directive (Directive 200439EC), an Implementing Directive (Directive 200673EC) and an Implementing Regulation (Regulation No 12872006)School of Computing and Communications homepage Our Undergraduate degree courses are designed to challenge and inspire you, opening your eyes to the possibilities that new communication technologies make available. Die Schule ist ein weltbekanntes Kompetenzzentrum, das eine Reihe von Lehr - und Forschungskursen auf Master-Niveau sowie Doktorandenausbildung anbietet. Wir sind verpflichtet, hochwirksame, Weltklasse-Forschung zu führen. Wir engagieren uns eng mit modernsten Branchen und sind aktiv bei der Entwicklung neuer Forschungspläne. The School works with businesses for collaborative research, supporting student projects, placements, part-time and full-time work, training and guest lectures. During my final year of university when I was recruiting for finance jobs, I never put much thought into prop trading . But then one day I saw an interview slot listing for a mysterious proprietary trading firm and immediately asked my trader friend across the hall whether I should apply. Dude, he said, You can make hella money if you do prop trading. People make millions of dollars right out of school. You should go interview with them they love technical and engineering majors too Lured by the dollar signs, I went through multiple rounds of interviews and ended up winning an offer at a well-known prop trading firm but then turned it down to do investment banking instead. Which may have been a huge mistake. In this new interview with a prop trader, youll learn exactly why I might have blundered back then as well as: How to network and break into prop trading . What to expect in interviews and how similar they are to SampT interviews at banks. What you do as a prop trader, and what your average day is like. How much money youll make . and whether or not there are any exit opportunities. Lets get started: Q: Lets start with your story and how you broke into prop trading how did it all begin A: I didnt follow the typical finance track because I was an engineer in university, went through academic research, and then did a few corporate internships. I didnt feel like I would make much of a difference working at huge companies, so I got more interested in finance and started looking at firms that would hire students with technical backgrounds. Since my school was close to Chicago and since the economy was much better back when I was recruiting, plenty of companies came to campus to recruit engineers for all types of positions. I interviewed with 3 different prop trading firms on campus, and won an offer despite having less of a finance background than the other candidates and a lower GPA (around 3.0) I convinced them that I wanted to work there more than anyone else, and in trading they sometimes value hunger over academic achievement. But it couldnt have been easy to work there if you didn8217t have much of a finance background how was it when you first started A: I actually struggled a lot at the start its a brutal environment at many prop trading firms and your experience depends 100 on what the head trader in your group is like. As a clerk (entry-level position at prop trading firms), you dont know what youre doing and youre completing tasks such as reconciling trades so you dont exactly get much guidance or exposure right when you start out. After a while, I started performing better and was promoted to a junior trader after 8 months there. That can be on the low side for promotion to real trader status, but it depends on the size of the firm and your performance. Q: Well circle back to what you do on the job in a bit, but what happened after you were promoted to junior trader A: I spent about 18 months there working in Chicago, and then went to London to help restructure the trading group we had in place there. Then, less than year into that, I left to go join a colleague who had left our firm to start his own group at a small firm back in Chicago. We did well for a few years and hired a few people there, and then my colleague took off and I tried to start another group which didnt go too well due to the credit crisis affecting liquidity. Long story short, I ended up back at my original firm, and have been expanding into another new market since then. Q: So it sounds like youve bounced around quite a lot, though Im noticing one common theme here: Chicago. Are there not as many prop trading firms in New York and other places A: In the US, its definitely concentrated in Chicago. There are a few in New York, but its much more institutionalized there whereas Chicago is more about market-making . Most of the big prop trading firms are based in Chicago and are still doing really well despite the crisis, recession, and everything else that has happened. Breaking Into Prop Trading Q: So it sounds like one of the keys to breaking in is being near Chicago so you can network effectively. But besides location, what else can you do to get yourself noticed and land interviews with these firms Many of them are small, extremely secretive, and dont even do on-campus recruiting. A: Networking is your only option you need to speak with someone at the firm and have him pass along your resume. Get in contact with a trader there whatever it takes and pitch yourself to get on the firms radar. Some of the bigger firms in Chicago actually do recruit on campuses, but they tend to focus on top engineering schools and good Tier 2 schools with solid technical programs because they want mathscienceengineering people rather than the usual finance and accounting crowd. You run into more trouble with the really small firms groups of 8 10 people that might specialize in something very specific such as Eurodollar options. If theyre doing relatively well making, say, 10 million per year, they have little incentive to recruit aggressively unless theyre looking to expand into a new area or unless they really need extra help. Q: Right, but those are exactly the types of firms that many readers would target. Those firms release almost no information publicly, so how can you even find traders there if you want to cold-call or cold-email them A: Your best bet is LinkedIn even if the firm itself doesnt have a website or lists no information publicly, people will still list the company they work at on their LinkedIn profiles. So you could go through and search for prop trading or proprietary trading and see what results turn up. You could also go through exchange websites they list the clearing members and you can track down people there who dont even have an online presence. And then you could get even more creative and search for something like Trading LLC on Google in a certain geography, find the full name, and use that to look for more information and look up people who work there on LinkedIn Once you have the contacts, then its just a matter of following the usual advice here on cold calling and cold emailing. Just make sure you dont cold call traders during market hours You could also use informational interviews. weekend trips. and so on if you can find alumni from your school who are in prop trading. Q: And what should you expect in interviews Are they similar to trading interviews at banks where you have to pitch investment ideas, answer brain teaser questions, and so on A: Yes, the questions are similar to what you get in trading interviews. Generally, they ask more math questions and brain teasers in the first round because they use them as a screen to see who can perform under pressure, think on their feet, and reason their way into solutions. One really important point to make here is that getting these questions wrong is OK they care more about your thinking process than your answer . The worst thing to do is to freak out and apologize every 2 seconds or to second-guess yourself constantly. In the second round, youll still get brain teasers but they will also move into more behavioral questions: how do you cope with stressful situations What would you do if Random Disaster X happened A lot of it is figuring out what your instincts are like and how well they get along with you. As a trader, youre glued to all 8 of your monitors all day and you spend a lot of time hanging out with everyone else there. So not fitting in is even worse than not fitting in investment banking because you dont go to meetings or visit clients during the day. The most important points in interviews are to come off as confident, but not cocky . and to meet the minimum bar in terms of math and problem-solving abilities. Q: Earlier you mentioned that you convinced them that you wanted to work there more than anyone else and that played a big role in landing your offer at the firm how exactly did you do that A: As I mentioned, my undergraduate GPA was only around 3.0 on the low end of all the other candidates so although I interviewed well, I was waitlisted because other candidates still had better academic backgrounds. They promised to let me know in 2 weeks, but I wasnt satisfied with that response so I typed out a passionate email to the Partner I interviewed with and said that I would work for free and would do anything possible to get in. I even went as far as saying that I would clean the bathrooms and do menial tasks I would have done literally anything to win an offer. All the other applicants were much more reserved and didnt try anything like this, so I came across as honest and hungry, and that pushed me over the edge into winning an offer. With this type of strategy, the key is to prove that youre genuine you must show off a history of this kind of passion and demonstrate how you act this way in everything you do. A Day in the Life of a Prop Trader Q: Thats a great story, and it goes to show how effective it is to want the job more than anyone else. In the beginning I didnt bother to define prop trading because I assumed that everyone reading would be familiar with it, but lets take a step back and do that how would you describe it A: Sure. There are a couple different types of trading, but the basic categories are agency trading and proprietary (prop) trading . With agency trading, you execute orders for clients and take a commission on each trade. The challenge there is finding enough willing parties to properly buy and sell large blocks of securities. With prop trading . by contrast, youre the principal and you invest your own capital in whatever way you want, within the strategies youve chosen and your risk limits. Small prop trading firms cant compete with large banks when it comes to executing trade orders for clients because they dont have the same resources and networks at their disposal so they focus more on coming up with trading strategies and investing in areas where theres less competition. Many prop trading firms focus on market-making . which is a form of trading where the company acts as both the buyer and seller for a type of security and makes money on the bid-offer spread. For example, if an institutional investor wants to sell 200,000 shares of a stock at 10.00 per share but cant find anyone willing to buy that volume at that price, a market-maker might step forward and offer to buy the entire block at 10.00 per share even if they dont yet have a seller lined up. Then, they would aim to sell it for more than 10.00 per share to another investor whos looking to buy the same stock but cant find it in the volume hes looking for. So thats an example of what you might do at a prop trading firm, but the strategies used go way beyond that the line between trading at hedge funds, trading at banks, and trading at small prop trading firms starts to blur past a certain point. Also, note that most prop trading firms focus on fixed income and commodity derivatives rather than equities 8211 and if they do something equities-related, it8217s usually index derivatives . Q: Thanks for that example. I do want to return to the hedge funds vs. banks vs. prop trading firms point in a bit, but for now lets keep moving forward with what you do on the job. Whats your average day like Can you walk us through what happens from beginning to end, the hours worked, and so on A: It depends a lot on your position clerk vs. junior trader vs. Partner and also the firm type and geography. Ive worked at both the clerk and junior trader levels at both big and small firms, and in both Chicago and London, so Ill try to go through all of those without making it too confusing. As a clerk in Chicago, I would get in between 6:00 and 6:30 AM and would start off the day by reconciling trades from the overnight European shift. Then Id start producing position reports for all the traders showing exactly where their money went the day before and where it is right now. The trading day would start at around 7:20 AM for those in Fixed Income, and I would spend most of my days making sure that their positions were properly updated whenever they asked for more information or needed it to make another trade. At the end of the day, I would spend time reconciling all the trades from that day and making sure that we were set for the next day of trading. I usually left the office around 6 or 7 PM as a clerk. As a trader . I got in around 6:45 AM (sometimes a bit earlier), and the day would start with a morning meeting to go over overnight happenings. After that, you might go down to the trading floor itself if you work there, or you might go to your desk and start monitoring the markets and news, and to begin making trades. If youre working on the floor, youre busy making markets all day long (similar to the simplified example I described above), but you may also be talking to other traders on the floor or the rest of your team to get a pulse on the market and figure out whos making different trades. At the end of the day, everyone gets together to discuss the major trades that happened that day and who might have been behind them at a large prop trading firm you have good market insight because you get exposed to everyone from major institutional investors to smaller firms and individual investors. We might also talk about market-making overall, upcoming economic events and announcements, and so on. If youre senior a Partner at a prop trading firm you might leave at 3 or 4 PM in Chicago because the Fixed Income pits there close at 2 PM. As a junior trader . you might be there until more like 6 7 PM because you have to do more work and analysis after the market closes. Q: Awesome, thanks for that detailed description of both roles and the hours involved. What about your experience at the firms group in London Was it roughly the same hours and tasks there A: The hours were worse in London because we had to monitor both the European and American markets. So as a trader, I got in at around 6 AM and even earlier than that as a clerk and I would trade straight through until 6 PM to catch both markets. I usually left around 7:30 PM, so I was at work anywhere from 12 14 hours per day, with most of my time spent glued to my screen. Q: Sounds pretty brutal. I guess the message is, Try to avoid trading multiple markets, if possible, or you may develop a monitor tan after enough exposure. What about your experience at the smaller prop trading group you started with your colleague A: Since it was a smaller environment, the hours were much more variable. I could put in as many hours as I wanted depending on what I wanted to get out of it and what my goals were. When I first started, I woke up at 4:30 AM and got in by 5:00 AM every day to take advantage of a certain market we were getting into I would go to sleep, wake up again to trade markets at night for a few hours, and then go to sleep again and wake up really early once again. Small firms can sometimes be more flexible with your working arrangements, and Ive seen traders win permission to trade from home, take more vacation days, and take time off when they want. As long as you make a lot of money, they dont care too much about strictly monitoring you. At big firms, by contrast, many people only take 1 week of vacation time per year (outside of the major holidays), and your schedule is much more dependent on your seniority at the firm. Q: Very interesting to note. I dont think this work from home concept would ever fly at a bank or PE firm, but its great to take advantage of if you can get it. How else is life different at a small prop trading firm vs. a large one A: Its a much different environment in terms of personal risk . At a bigger firm, even if things dont go well in your group and your PampL doesn8217t look great or you lose money, you still make at least base salary and youll get some form of bonus. And if liquidity dries up or the spreads get too tight, you can always move to another group at the firm. So theres less risk and more security for you. You make much bigger trades as well, so the mentality is quite different a single trade there might actually move the markets, and you can gain more insight into why the markets might be mis-priced because your counterparties are often large hedge funds. Just as one example, when I worked at the large prop trading firm, I would know whenever Brevan Howard (a huge force in Fixed Income, options, and futures) was doing something. After a while, you start to recognize the size and style of trades a firm like that makes, which gives you more color on the market. At a smaller firm, you dont have that kind of insight so you must be more careful with the positions you take and the amount of leverage youre using. If the spreads move way out of line, for example, and you dont know why or you dont have enough capital, you might need to close out your positions. Prop Trading vs. Hedge Funds vs. Sales amp Trading Q: You just went over the differences between prop trading at small vs. large firms, but what about trading at prop trading firms vs. hedge funds vs. sales amp trading at bulge bracket banks Obviously the amount of capital under management is a lot different, but what about the trading strategies themselves and the markets you trade in A: Besides the capital under management, the biggest difference externally is the return on capital . At prop trading firms, you could easily get returns of over 100, and it might be more like 200 300 depending on the firm. But with a larger capital base its impossible to do that. If you had 20 billion under management, a 200 return would turn you into a 60 billion firm, and you couldnt replicate the same strategies year after year. You might see tens of millions or less invested in prop trading firms, and the much lower capital base explains why they can earn such high returns. The markets they trade in are also much smaller if a prop trading firm had 50 100 million invested in a specific product like natural gas options it might be the biggest market-maker (but not necessarily the biggest player ) in the space. Hedge funds . by contrast, tend to be much larger and focus more on directional trading (simply taking long or short positions and betting on the security8217s future price) rather than market-making. You could mirror some of the strategies a hedge fund uses at a prop trading firm, but generally the trading styles are quite different. With sales amp trading at banks . beyond the addition of agency trading, youre once again managing much larger amounts of capital and you tend to be more conservative with strategies and risk management. You invest in much bigger markets, so hypothetically you could keep growing and growing without needing to expand into different areas as a prop trading firm would. At a prop trading firm, if you got a 200 return in one year and therefore tripled your capital, you would have to re-deploy it (whatevers left after the traders have taken their cut) into different areas, push new products, and so on. Ive seen that happening more and more over the past 10 years many firms that used to focus just on equity options or fixed income options have been diversifying and getting into other markets such as grains, energy, and so on. Q: So it sounds like theyre different because of the capital under management, the strategies used (directional trading vs. market making vs. agency trading), and the markets they trade in. Would you recommend starting out in prop trading rather than at a bank or hedge fund What are the trade-offs A: Id say it depends on your risk tolerance and personality . If you go the prop trading route straight out of school, your exit opportunities are extremely limited and youre a bit screwed if you decide that its not for you. So I wouldnt recommend going into it unless you love trading, you dream of the markets, and you couldnt see yourself doing anything else. You can make a ton of money, but its not for everyone and some people find they dont like it. Its not even particularly easy to move from a prop trading firm to a hedge fund or bank because the styles of trading are so different. You would be overly specialized unless you happen to find a hedge fund that uses a very similar strategy. So if youre more uncertain of what you want to do, its better to start out at a large hedge fund, or even better yet, at a bank. Trading still gives you fewer exit opportunities at both of those as well, but at least youll have a brand name on your resume and you can move around to other industries more easily if you havent worked there for too long. Q: So Im guessing its not too common to move from a bank or hedge fund to a prop trading firm, either A: Traditionally, no, because the styles of trading are so different. But following the financial crisis and the increased regulation, more traders from banks have been coming over as banks have cut back on the prop trading business internally . Most of the time, though, theyve been more senior people with established track records as opposed to junior traders they went to the top-tier Chicago-based prop trading firms because they were offered lots of capital and the freedom to do what they wanted there. Q: Beyond just the differences in trading strategies, do you think any of that has to do with the cultural differences at banks vs. hedge funds vs. prop trading firms A: Thats a good point, but Im not sure you can draw any definitive conclusions there. Just like trading in other areas, the culture at prop trading firms is male-dominated with lots of yelling and stress all day long. Sometimes that convinces people who would otherwise be good traders to decide against doing it. You tend to see that type of culture at banks as well, though it varies by group, and its almost impossible to categorize the culture at hedge funds because each fund is different and it depends on the background of the people there and the strategies they use. Pay, Exit Opportunities, and More Q: Now lets turn to the question that everyones really curious about: how much you get paid in prop trading. Ive heard all sorts of stories, from people receiving decent base salaries at larger firms with bonuses based on your PampL to people receiving no or very low base salaries with pay 100 dependent on performance. What should you expect, and how does it change as you move up A: Unfortunately, theres no quick and easy answer to this one. Heres what I can tell you about the pay at different levels: At Chicago-based firms at the lower levels (clerks), the pay is very discretionary and youll likely earn a small salary in a tight range based on how good you are. Ballpark, maybe around the same as the base salary that an investment banking analyst or sales amp trading analyst at a bank would earn somewhere in the 60-75K USD range. As a junior trader, its still discretionary and you dont get to negotiate a percentage of your PampL most of the time, so its random and very dependent on the generosity of the Partner in your group. At one of my firms, the Partner was notoriously bad with profit-sharing and always screwed over the junior people even if they made more than their fair share of money for him but another group had a very generous Partner that paid everyone well, even at the junior levels. I hesitate to give exact numbers for junior traders at prop trading firms because its so dependent on performance and your group, but here8217s what you might expect with good performance: Year 1: 75K Year 2: 100K Year 3: 200K (If you8217re a producer, much less if you8217re a body) Year 4: 350-400K (if you8217re a solid producer and your group does well, but highly variable) Past Year 4: It becomes very dependent on group performance and what you8217ve brought in personally. And it might be lower or higher than these figures depending on all the other factors above 8211 that8217s a very wide range, but unfortunately compensation data is difficult to find for prop trading firms. Despite rumors to the contrary, youre not going to make 1 million as a junior trader unless you8217re a star in a group that is outperforming. Q: So how often does a group do exceptionally well And what kind of numbers do you need for that to happen A: As a quick anecdote, I knew of a 1-person group (1 seasoned trader working with 1 clerk) that made 20 million one year. So in that case, the trader would have definitely pulled in a 7-figure payday. If you were in a bigger group and that group made close to 100 million, lets say 80 90 million . you might also earn that kind of money even if you were more junior. I wouldnt say this kind of performances happens often it8217s more common in bull markets and when liquidity is high. You dont see it as much post-crisis, though some groups do perform that well every year. Q: So you shouldnt hold your breath waiting for 7-figure bonuses as a junior trader what about when you become a Portfolio Manager or Partner How long does that take, and what type of pay can you expect A: At that level, your pay structure shifts and then you can negotiate a percentage of your PampL for your bonus. The timeframe to make Partner varies a lot, but you can do it extremely quickly (a few years) if you have the right numbers and you make enough money. Ive seen people do it with 3 years of experience sometimes a trader will leave, or the firm is expanding into a new product, and if youve done well enough they might place you in that role. Partners might receive 25 40 of their PampL for their bonuses. So if youve made 5 million at that level, you could easily get a 1 2 million bonus . This compensation may also be tiered . especially at smaller firms you might make a certain percentage on the first 500K or 1 million of profit, and then the percentage steps up in increments after that. Since youre trading much bigger positions at large prop trading firms, its easier to earn a high profit there but you also have to split it among more people in your group, so you dont necessarily make more as an individual. Also at larger firms, the pay for everyone outside the portfolio manager head trader is more discretionary and it8217s up to the PM to award amounts based on personal performances 8211 so you may not see the percentages quoted above. Q: So what might you expect at a smaller prop trading firm What are realistic numbers for a group thats doing relatively well A: A smaller group or firm thats doing well might have 10 traders total . with 6 guys on the floor and 4 on computers upstairs. They might make 10 million in a given year trading something specific like Eurodollar options, and then split the PampL between everyone there so the Partner(s) might earn million-dollar paydays, with the rest of the traders getting somewhere in the mid to high six-figures depending on their seniority and individual performances. At smaller firms you can sometimes extract better terms for your bonus and negotiate your way into receiving a higher percentage of your PampL. If you have a proven track record and strategy, smaller prop trading firms may fight over you and some may offer you better percentages or more capital to entice you into joining them. Q: Finally, I have to ask the elephant-in-the-room question here: weve been focusing on the P part of that PampL and assuming that you actually make money. What happens if you lose money does that just mean you get a 0 bonus Do you get fired due to poor performance A: It depends a lot on the size of the firm, how long youve been there, and your performance in past years. Generally you are safer at big prop trading firms if you have one bad year, especially if you have a solid track record from the previous years. At really small firms, you might not be so lucky unlike large banks where there8217s a tolerance for losing money at first, in prop trading its 100 about your performance. So the reality is that yes, if you lose money at a small prop trading firm, you have a high chance of being let go. In terms of bonuses, you should expect no bonus if you8217ve lost money . regardless of whether you8217re at a big or small firm. Q: So lets continue playing devils advocate and say that things dont work out for you in prop trading. What happens next You mentioned there arent good exit opportunities, but surely failed traders must go on to do something else, right A: A few options Ive seen people pursue: Some people joined the finance departments of big companies. A few went to the back office at large banks. Some have applied to MBA programs to switch careers. Some have become financial advisers or gone into something like private wealth management . Note that not all of these former co-workers failed at trading some of them just didnt like the work itself, couldnt fit in with the culture at the firm, or decided they wanted to do something else, and left voluntarily. If you get fired, its really tough to get hired at another firm. Most prop trading firms prefer to hire organically and recruit people right out of undergraduate with no work experience they only poach traders from other firms when those traders have been extremely successful. So that is a downside to prop trading, and one of the risks you need to consider. Q: Right. But since youve done quite well over the past few years, you wouldn8217t have to worry about any of that Im guessing youre planning to stay in prop trading for the foreseeable future A: Actually, Im also interested in switching careers at this stage. Although Ive done well in trading, I8217ve also gotten more interested in investing in entire businesses and learning how companies work as opposed to just trading options or commodities. That happened partially as a result of investing my own money and becoming more curious about business in the process. So right now, Im applying to top MBA programs and Im planning to use that to transition into more of a corporate finance role, whether in banking, PE, or something else closely related. Q: Interesting. I guess that just goes to show you that even if youve done well and enjoyed a particular industry, you may still switch to something completely different these days. Thanks again for taking the time out to chat, and good luck with those MBA applications A: No problem, it was my pleasure. This is a fantastic interview, but I8217m still left with a few unanswered questions: I will be graduating from a non-target school this fall with a degree in Economics and a 3.4-3.5 GPA. I have been profitably trading equity options (non-directional) for over one year. I would say I8217m not theoretically math inclined, but I8217m well versed in statistics. 1.) I still am unsure of which 8220trading path8221 would best fit me. Prop trading seems technologically focused and I have no experience in programming, which also seems to be a problem for BB banks too. How important is the degree (and logicproblem solving skills with it) and a proven track record compared to more advanced mathprogramming skills 2.) Would the 8220Econtrading combo8221 be viable in searching for a sales trading job Or are sales traders more reliant on 8220people skills8221 I feel like sales traders are an often overlooked opportunity. 1) I8217d say a proven track record is most important 2) Yes, this is useful though communication and sales skills are also very important for sales traders. You may also want to demonstrate your passion in the stock markets for such role Does the age factor affect prop amp hedge fund trading careers also What if someone is in their mid-30s (but has legitimate and unique reasons for this 8220delay8221) Yes it can. If you can demonstrate a track record then being in mid-30s shouldn8217t be too big of a problem. Hi, I have always wondered, why do good traders look for exit opportunities to work elsewhere while they can just quit their jobs and just trade from their home Since they have the experience on how to trade, can8217t they just take their own money and trade for themselves from their home instead of working for someone Because I have seen many people who don8217t even have a degree or work experience, but all they have is just a small capital and trade their own money while sitting at home, and they are making a pretty decent living out of it So by comparison to those professional traders in SampT or prop trading firms, I think those professional traders have a better chance doing that since they have the skills and experience, and yet I rarely see professional traders do that Why you just summed up my goal. develop skills in HSUG, make it into a prop shop, get fired and then do it solo Thanks again for great articles and replying to previous questions, finally i found a chicago based P. T firm which after a demo period. funded me with 150 k account and 60 of profits payout which i am trading remotely. if i continue consistency in profits in P. T account, can a u. s.a based company apply for a working visa for me as a prop trader ( i have track record of personal account ongooing track record of P. T with 150 k account ) Thanks for the great article. After reading it, i looked up a bunch of prop trading firms to see if they recruited at my school for potential internships. However, i also noticed a lot of the lesser well known shops have 8220training programs8221 that charge excessive fee8217s. Is there any legitimacy in these smaller firms How would i distinguish legitimate firms from scam You mean these smaller firms are charging you fees for training you Most firms offer training to their candidates for free so I8217m not quite sure if that8217s legitimate. couldn8217t help but comment, after trading prop successfully for over a decade (actually taking home high-sixlow-seven after exp, cuts, comm ever year. because that is what its all about. not gross) success is dependent on one thingproblem given you are trading material. a mix of, but not limited to: math, risk, endurance, stomach, insomniac (granted you dont have a night clerk yet) amp constantly learningimproving from mistakes given you have the givens. its not what company you work for, its not who the head trader is, or speed of the network, or marginsfirepower of the firm etc. etc..These are just stepping stones the majority of aspiring youths concern themselves w as obstacles (ie. excuses). the problem is8230 go pick up a mirror. thats the problem. im being completely serious, how bad do you really want it if) you can8217t get into a top tier prop company as a trader. go clerk nights for them or a lessor if) you cant learn from a senior trader, go find another. if) you payout is too low, go find somewhere else that will pay you for the fair industry rates if) you cant make enough money in markets, go find another strategy than can (no matter what the cost: hours amp hours of charting, excel, backtesting, etc. etc) senior trading (non-institutionalor partner money) is unlike almost ever corporate profession. you eat Exactly what you kill after expenses. NO salaries, there never should be outside of clerking amp support infrastructure. This is how the 8220really8221 big money is made. this is how the sharks feed. if you cant 8230. go find a way you can8230 (this applies to whatever stage you are in you trading career) if 10 mil amp a thailand beach is what you seek than8230 just getting a job at a prop firm is meaningless by itself. extreme success in trading depends on the individual amp nothing else, winners always find a way. how successful or worthless you are in the electronic futures dream machine is your own decision. period, paragraph, happily ever after. i have a successful track record of turning my own trading account from 10k to 18k during 3 months with near 400 trades (and it is ongoing).i am a trend follower in cme futures in intraday and i have a rigid plan for my account. after being 3 years in loss now i can say i am a consistent in profits(2 months in paper trading and 3 months in live trading).the reason is that i have clear exit plan and more important i have controlled my ego and trading psychology and have positive expectancy system with proper reward risk ratio amp proper money management. ps i have BS of software and programming skill in Java that i think it has nothing to do with trading. as i read at least 6 months of tack record is needed for prop trading, if i can continue it to another 3 months and then with a 6 month track record is there any chance to trade on a firm account as low as 100 k. (p. s i live in iran ) is there any global PPT that accepts remote taders or is there any PPT in near country like dubai. any recommendation is appreciated. Potentially I think you could, yes, but it depends on the region you8217re in8230 I8217m not familiar with the environment in Iran. There are plenty of firms where you could probably trade remotely, but your best bet is to find places in a financial center like Dubai and network in-person there first. Thanks for the inspiring questions and answers above. I am a recent master graduate in Physics, targeting on hedge funds and prop shops in Hong Kong. Last year, I got the first round tel interview from Jane StXXXt. As you said, they asked me mostly maths and stats questions. I think I could marginally answer most questions, but I didn8217t successfully proceed to the next round. Since you said 8220getting these questions wrong is OK they care more about your thinking process than your answer8221. What exactly is the thinking process most prop shops are looking for Basically Physics, and many other, students receive little training on statistics and other topics, like brain teasers, which could be asked in the interviews. How the successful applicants prepare themselves for their applications and around how much time they have invested Moreover, will it be very strange if I offer to work for free at the early stage of my application What can I do if I failed at the first few rounds of the interviews Thanks for your insightful ideas. Well, there8217s a thin line between getting questions 8220wrong8221 and having the wrong thinking process. Basically they want to see that you can break down problems logically, ask questions when you don8217t know the answer, and use your reasoning to ask them for hints8230 but it also depends on the specific questions. The best way to prepare yourself is to get a book on brainteasers and practice from there: amzn. tovbKo3L Working for free can work, but I would only use that if you have no other good options. What are your thoughts on prop firms that require a risk deposit (guaranteed), an upfront fee for training and access to software, programs, etc and compensate on a profit-sharing base Seems I can8217t get a straight answer anywhere else since all think it8217s a scam idea. Thanks in advance From what you said, I don8217t think you need to do much 8220selling8221 because your experience already sounds impressive. The main thing is to focus on explaining how all of that translates over to the somewhat different strategies of larger places (talk about how the required skill set is the same, even if the specifics are different). For prop trading, do they only value math and engineering degrees, or would it be possible to break in with just a finance degree, as long as I could demonstrate good quantitative skills and an interest in financial markets In addition, I8217ll be coming from a non-target (USC) nowhere near Chicago. Is this too much of a long shot My next question would be, how exactly can I demonstrate good quantitative skills Unfortunately I won8217t be able to take any more math classes beyond basic calculus due to time constraints in graduating. I have the drive and passion to learn more math on my own, but proving this to firms is a whole other issue. You can get in with other degrees, but more technical ones definitely help. USC would be tough because of the lack of prop shops there, so you would probably have to travel. Quantitative skills: do a self-study course, start trading on your own, read books, develop your own strategies based on stats numbers. I am a computer programmer with a MS in computer science and Ph. D in Civil Engineering. Currently I am working for a bank doing IT work. I have a passion studying the trading strategy. I have spent more than fifteen years to develop an algorithm to trade equity. It has more than 20 annual compound return with less than 10 maximum draw down. I also trade this strategy with my own money. I am wondering If I have a chance to get into a prop trading firm If so, do you think if it is possible to work from home since I do not live in Chicago nor in NY City. You can trade on your own. Re working for firms at home, I think it depends on the firm and your arrangement with the firm 8211 hard to say. I currently work in the back office for a large hedge fund administrator, I have experience with multiple top tier clients (GS, Brevan Howard, JPM). But, I have always been passionate about trading. Unfortunately, I graduated in 2008 at the height of the recession and any job was tough to come by. I graduae from a state school with a finance degree and a cumulative GPA of 3.68. Do you think the barrier to enter the prop trading field would be too difficult coming from a back office role No, as long as you are really good at trading and can demonstrate your passion in the field. Do you trade any mock portfolios etc Can you network with HF managers and ask one of them to mentor you Perhaps you can even suggest them ideas If you do the above I think you can get in. It will just be a matter of time. Hi, I have a question very specific to my personal situation. Im a freshmen attending Hampshire College. (A pretty good college, but to be honest I messed up the first few years of high school so my cumulative GPA wasnt great) Would you recommend going to an ivy league business school to get an MBA directly after graduating from Hampshire College if I want to become a prop trader, or do you think Id be able to get a job as prop trader without a Top Tier university on my resume. Also note, on a 100,000 portfolio I started 4 months ago, Ive profited 40 (portfolio is now worth 140,000). Id really appreciate it if you could let me know if you thought an MBA from a top tier university would be beneficial before starting my job search, or if Hampshire College partnered with good networking skills and a history of making money in the stock market would be sufficient for my resume. Thanks Commodity trading firms have been in the news over the last couple months because of the massive profits they8217ve been making lately. Names like Vitol, Glencore, Cargill. Could anyone point me to any linksinfo about what working at one of these firms is like Basic info like day in the life of, different roles and functions, career paths, etc. would be great. I8217m assuming the highest paid workers at these firms are traders, but is it more about trading derivatives (futures, forwards, etc.) or arranging physical delivery of commodities (importexport)Maybe both Also, any input on career switching into one of these firms I8217m currently an associate at a boutique investment bank doing MampA work. While the work I do is completely unrelated, at least I have some finance experience. Not sure of those offhand, but we hope to cover more about commodity trading firms in the future. I can8217t reasonably answer your questions on the day in the life and pay right now. In terms of switching in, it8217s all about showing you love the markets, trading, and especially following commodities8230 if you8217ve done M038A you need to be able to answer why you went into that first rather than trading. And present lots of great ideas about how to trade commodities and ways to take advantage of trends in the markets. Hey, I wanted to know what is the basic knowledge you need to become a Prop Trader, I mean I8217m from India. I have done my graduation in Financial Markets(The Education system is pretty different here). I have been working for a broking firm since a year now. So I wanted to know if there are any specialised courses in Prop Trading As in, what do the recruiters look for in an employee Also, if you could tell me, what is the right age to get into Prop Trading, I mean what is prefered Thanks. I would also like to add that I8217m NOT trading right now, but I8217m very much interested. I am a Certified Financial Planner and I was in the wealth management department. But now I have been shifted into Debt Dept. So I don8217t have a knowledge of trading but I do know how to get the deals finalised, if that8217s of any use here. Vielen Dank. VBA, Matlab, C, SQL etc are a plus but you really must be very goodproficient enough. But that must mostly applies to Algorithmic Traders, making high frequency trading models etc. But by quant skills I mean maths. Be able to calculate i. e. (random example) 0.10.05 8220at a blink of an eye8221. Plus knowing how to make bionomial trees, monte carlo simulations, filtered historical simulations (ok that8217s too much maybe) etc This type of skills and knowledge is highly appreciated. First part applies to roles where you8217d help with some IT prior to transitioning. In that sense it or valuable to have these skills. I8217ve seen VBA come up the most, SQL is the next most common and the third I8217d say is python. C languages and Matlab are really more for if you want to go down the tech or quant route. Though if the knowledge gives you an amazing strategy, I could see it working. The math skills you noted are more than you need. Unless your specific trading strategy revolves around them, I don8217t see how they8217d go beyond impressing people that you know math over you have the skills to trade. I was once invited in a first mathematical assessment centre at a top Prop Trading firm in Europe. The amount of questions you had to get correct regarding the very very tight time limit (80qs in 8mins, 50 at least must be correct) made it extremely difficult to get to the next stages. Plus if you answered incorrectly, there was negative grading. A guy I know also had once an interview with either a HF or Prop (don8217t know really) and they asked him during the interview to measure Pi using Monte Carlo simulation, something like that. So, generally, beware that without strong quant skills you have little chances to break in (at least in Europe). Oh, and one last detail the company stated explicitly that should you be unsuccessful in that test, you will never ever be considered in any future job applications to that company.. For the record, the company is Optiver, it8217s a dutch prop trading firm and started in 1987 if I recall correctly. They stated somewhere in their website that they have never had a single negative year in terms of profits so far. Personally, I think those people who pass these tests are generally weirdos with no soft skills. Yes, I8217m generalizing and that8217s because it8217s the easiest way to make a conversation. Yeah, I agree. One more thing (assumption) I would like to point out is that either the environment in prop shops can be very positive or demoralizing if you8217re not doing well. Middle ground must not be so common. What you must have in mind is that prop trading, in essence, is like someone who trades his own money in financial markets. HeShe just has so much capital that he needs someone else to assist himtrade on his behalf and with hisher money. I believe that this factor makes prop shops to have a much different work environment than being a trader at an IB or HF. Prop Trading at this day in age is definitely not institutionalized at all. Therefore you will find a wide variety of recruitment and interview tactics as well as a large range of business strategies. That plays to each persons advantage if they are dogmatic about finding the right opportunity but might not be fruitful for someone looking for a handout. I work for a prop firm in Sydney, and have heard about another prop firm here testing candidates by attaching heart rate monitors to candidates and asking them to perform mathematical calculations. 6 out of 15 applicants were eliminated on this test alone, the metric being able to answer questions quickly and accurately with a low hear rate. Now that8217s a high pressure interview. hey brian, hell of a question here. I8217ve got a close friend to whom was landed an ib internship at an elite boutique couple weeks ago, but he8217s just received an opportunity to start a recruiting process to a top BB, IBD position as well. He8217s from a target school, and he has great chances of getting this internship (he8217s from another country, where internships comprises 2 years period, doing it while having regular classes). If his medium term goals (2, 3 yrs) involve moving to an elite PE, should he quit from his current position, pissing off everyone in his current office or should he try the top firm spot (is there any chances of taking the rest of this conversation not publicly, by email) tks He should still interview and see if he lands the job. When he lands it, he can then figure out what to do. Ideally its best not to renege an offer but if he really clicks w the other team and they give him an offer, he should just be honest w the guys who gave him his first internship and renege the offer. If I8217m a self made millionaire, from a second tier university or first tier public university that never worked for a boutique firm, or bulge bracket firm, is that going to hurt or help my prospects during an interview, vs. the fresh ivy league graduate that is not a millionaire Would I be overqualified or disqualified due to not having the right pedigree People will probably ask why the hell you8217re going into finance if you are already worth that much. So you definitely don8217t want to say that. Just say you8217ve done well at XX but want to do finance because of YY. Not being from a top university and not having experience will make it very difficult to get in no matter how much money you have. If there is any truth to your claim, keep doing whatever you did to become a millionaire 8211 without knowing you the probability that you make more millions in trading is low. 8220Also, note that most prop trading firms focus on fixed income and commodity derivatives rather than equities and if they do something equities-related, its usually index derivatives.8221 Why Is it because equity trading is now easily done by robots Good question, not sure why exactly (anyone else feel free to contribute here). I think it8217s just the tradition that Chicago focuses on FICC and NY and other areas are more into other products, but take that with a grain of salt because I really don8217t know. Don8217t think it8217s completely about automation though. I8217m not sure what the precise reason, but here are my thoughts: They historically been market makers 8211 and making markets on large products (treasuries, short term interest rates, equity index derivs, commodities), specifically options on the future provided a large amount of liquidity and 8220edge.8221 In the past 10-20 years there hasn8217t been significant edge making markets in single name equities for the non-bank, non-specialist firm. They did make markets in equity options, but going to pennies sent that to the computers. That being said, there are many prop trading firms out there that are purely directional equity or futures traders. I don8217t have experience with them and they are a different animal, though what I do know is there are people that do very well there. In addition 8211 leverage. You get much more leverage if you are a smaller prop firm by trading derivatives rather than cash equities. Want an outstanding 200-300 ROE Good luck doing that with cash equities and surviving. Ich hoffe, das hilft. I personally don8217t work at prop trading firms, so I can speculate only, but would say an important factor might be the liquidity. This really relates more to fixed income and FX, which really are way larger (both cash-wise, and derivatives-wise) than any other market in the world. As very rough numbers, FX around mid-2010 had a daily volume of 4 trillion USD cash derivatives. The total global equity volumes (cash derivatives) would be around 60 trillion annually, so let8217s take any benefit of the doubt from me and say it8217s 100 trillion. All these were pulled from my memory where they ended up from BIS, so I am very happy for anyone to correct the figures. Anyway, assuming the above, you can see that FX market trades in notional volume in 25 days what the equity markets globally trade in 1 year. It8217s by no means as extreme for fixed income, but fixed income is still order or two in magnitude larger than equities. This is slightly reflected in futures 8212 the most liquid contracts in the world are the eurodollar futures on a short term USD interest rate called LIBOR. In these futures, and in plenty of others, CME is the world leader.
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