Equity Markets in Transition (eBook)

Reto Francioni has been a professor of applied capital markets theory at the University of Basel since 2006. Since 2013, he has been a member of the Board of Directors of UBS Group and since June 2016, he is Chairman of the Supervisory Board of Swiss International Airline as well as Senior Independent Director of the Coca-Cola HBC AG. Reto Francioni was CEO of Deutsche Börse AG from 2005 to May 2015. From 2002 to 2005, he was Chairman of the Supervisory Board and President of the SWX Group (Stock Exchange of Switzerland). Reto Francioni was co-CEO and Spokesman for the Board of Directors of Consors AG from 2000 to 2002. Between 1993 and 2000, he held various management positions at Deutsche Börse AG, including that of Deputy CEO. From 1992 to 1993, he served in the corporate finance division of Hoffmann-La Roche as a member of the Directorate. Prior to this, he was on the executive board of Association Tripartite Bourses and worked, from 1985 to 1988, for the former Credit Suisse. Reto Francioni started his career in 1981 in the commerce division of Union Bank of Switzerland. He studied and earned his doctorate in law at the University of Zurich. Robert A. Schwartz is the Marvin M. Speiser Professor of Finance and University Distinguished Professor in the Zicklin School of Business, Baruch College, CUNY.  Before joining the Baruch faculty in 1997, he was Professor of Finance and Economics and Yamaichi Faculty Fellow at New York University's Leonard N. Stern School of Business, where he had been a member of the faculty since 1965.  In 1966, Professor Schwartz received his Ph.D. in Economics from Columbia University.  His research is in the area of financial economics, with a primary focus on the structure of securities markets.  He has published dozens of refereed journal articles, twelve edited books, and eight authored books, including Micro Markets: A Market Structure Approach to Microeconomic Analysis (Wiley & Sons, 2010); Mastering the Art of Equity Trading Through Simulation: The TraderEx Course (co-authored with Gregory Sipress and Bruce Weber,Wiley & Sons, 2010); The Equity Trader Course (co-authored with Reto Francioni and Bruce Weber, Wiley & Sons, 2006); and Equity Markets in Action: The Fundamentals of Liquidity, Market Structure and Trading (co-authored with Reto Francioni, Wiley & Sons, 2004).  He has served as a consultant to various market centers, including the New York Stock Exchange, the American Stock Exchange, Nasdaq, the London Stock Exchange, Instinet, the Arizona Stock Exchange, Deutsche Börse, the Bolsa Mexicana and the Istanbul Stock Exchange.  From April 1983 to April 1988, he was an associate editor of The Journal of Finance, and he is currently an associate editor of the Review of Quantitative Finance and Accounting and the Review of Pacific Basin Financial Markets and Policies, and is a member of the advisory boards of International Finance, The Journal of Trading and on the editorial board of International Journal of Portfolio Analysis & Management (IJPAM).  In December 1995, Professor Schwartz was named the first chairman of Nasdaq's Economic Advisory Board, and he served on the EAB until Spring 1999. He is developer, with Bruce Weber and Greg Sipress, of the trading and market structure simulation, TraderEx. In 2009, Schwartz was named the first recipient of the World Federation of Exchanges’ annual Award for Excellence.

Contents 5
Abbreviations 8
About the Authors 11
About the Editors 14
Contributors 16
Part I: The Value Chain of Exchange Organizations: Systematic Overview 18
Chapter 1: Exchange Organizations: Thoughts and Reflections 19
1.1 Just Another Company 22
1.2 Not Just Another Company 23
1.3 Another Company 25
1.4 Making Risk Management Work: OTC Derivative Clearing 27
1.5 Making Risk Transparent and Affordable: Global Liquidity Management 29
References 30
Chapter 2: An Exchange and Its Value Chain 31
2.1 Introduction 31
2.2 The Exchange: Link to the Real Economy Through Investments 34
2.2.1 Primary and Secondary Market 34
2.2.2 Mission: Capital allocation through price discovery 37
2.2.2.1 Precondition: Build, maintain, and grow liquidity pools 37
2.2.2.2 Price Discovery 38
2.2.3 Performance Criteria 39
2.2.4 Home Markets 39
2.2.4.1 The Home Market Principle 40
2.2.4.2 Reference Functions 40
2.3 Layers of an Exchange 41
2.3.1 Organization 41
2.3.2 Regulation 41
2.3.3 Technology 42
2.3.4 Stakeholders 44
2.4 Customers of an Exchange 45
2.4.1 Issuers and Intermediaries 45
2.4.2 Investors: The Investment Process 47
2.5 The Elements of the Value Chain 47
2.5.1 Trading: Price Discovery 51
2.5.2 Clearing: Risk Management and Market Stability 55
2.5.2.1 Novation 56
2.5.2.2 Netting 57
2.5.2.3 Risk Management 60
2.5.2.4 Lines of Defense 62
2.5.2.5 Default Management 64
2.5.2.6 Key Criteria for CCP Rating 65
2.5.3 Settlement: Delivery Versus Payment 66
2.5.4 Custody: Administration and Safekeeping 68
2.6 The Objective of the Value Chain: Straight-Through Processing 70
2.7 The Role of Technology Within the Value Chain 73
2.7.1 Key Characteristics 73
2.7.2 The Trading Platform: The Formula One of Exchange Systems 73
2.7.3 Price Discovery: Software vs. Software 74
2.8 Risk Management Along the Value Chain 75
2.9 Contractual Relationships Within the Value Chain 76
2.10 Market Regulation: Investor and System Protection 79
2.11 New Customer Needs 81
2.11.1 Scope and Mechanisms of the Financial Market Reform 81
2.11.2 Mandated Change of Market Structure and Participants’ Roles 81
2.11.3 Strategic Balance Sheet Management 82
2.11.4 New Requirements: Market Access, Liquidity, and Post-trade 83
2.11.5 Outlook: Transformation of Global Capital Markets 84
References 85
Chapter 3: Primary Market: Bringing Products to the Market 86
3.1 An Initial Public Offering 86
3.1.1 Issuing Business 86
3.1.2 Placement of Shares 87
3.1.3 On- and Off-Exchange Trading 89
3.1.4 Advantages and Disadvantages of a Listing 90
3.1.5 Delisting/Going Private 91
3.2 Financial Market Communication 92
3.2.1 Equity Story 92
3.2.1.1 Company-Specific Factors 92
3.2.1.2 Sector-Specific Factors 93
3.2.1.3 Other Factors 93
3.2.2 IPO Communication 93
3.2.3 Ongoing Investor Relations Activities 95
3.2.4 Investor Relations Tools 96
Further Reading 98
Chapter 4: Secondary Market: Trading, Price Discovery, and Order Matching 99
4.1 Price Discovery 99
4.1.1 Importance of Price Discovery 99
4.1.1.1 Expectations 100
4.1.1.2 Public Goods 100
4.1.2 Mean Reversion, Returns Autocorrelation, and Accentuated Volatility 101
4.1.2.1 Volatility Analysis: Evidence 102
4.1.2.2 Monitoring Volatility 105
4.2 Market Structure 108
4.2.1 Continuous Trading in Order-Driven Markets 108
4.2.1.1 The Link to Continuous Trading: The Spread 108
4.2.1.2 Market Orders and Limit Orders 110
4.2.1.3 Costs and Benefits of Market Orders and Limit Orders 111
4.2.1.4 Transparency and a Consolidated Limit Order Book 113
4.2.1.5 Limitations of the Continuous, Order-Driven Market 113
4.2.2 Call Auctions in Order-Driven Markets 115
4.2.2.1 Essentials 116
4.2.2.2 Double Auction 117
4.2.2.3 Call Auction 120
4.2.3 Market Making 128
4.2.3.1 Quote-Driven Market vs. Order-Driven Market 128
4.2.3.2 A Market Maker’s Role in an Order-Driven Market 129
4.2.3.3 A Market Maker’s Role in Low- and Mid-Cap Stocks 129
4.2.3.4 Market Maker Costs (Costs of an Unbalanced Inventory and Asymmetric Information) 130
4.2.3.5 Market Makers as Liquidity Providers 131
4.2.3.6 Market Makers as Facilitators 131
4.3 Functions of Market Models (a Designer’s Perspective) 131
4.3.1 Determination of When a Trade Occurs 132
4.3.2 Determination of the Location of a Trade Occurs 133
4.3.3 Determination of the Counterparts of a Trade 133
4.3.4 Determination of the Price of a Trade 133
4.3.5 Determination of the Quantity Traded 134
4.3.6 Determination of What Is Traded 134
4.3.7 Determination of Post-trade Modalities 135
4.3.8 Provision of Market Transparency Pre- and Post-trade 135
Chapter 5: Clearing 136
5.1 Introduction 136
5.2 Background 137
5.2.1 History of Clearing 137
5.2.2 History of Central Counterparties 138
5.2.3 Global Context and Focus 139
5.2.4 Definitions 139
5.3 The Clearing Process 140
5.3.1 From Trading to Settlement 140
5.3.2 Trade Entry into the CCP 140
5.3.3 Participants of the CCP 142
5.3.4 Netting and Offsetting 144
5.3.5 Transaction and Trade Management 148
5.4 Risk Management 148
5.4.1 Novation and Pre-trade Risk Tools 149
5.4.2 Counterparty Credit Risk: Access Criteria 149
5.4.3 Default Management Process 151
5.4.4 Basics Margin 155
5.4.5 Lines of Defense 157
5.4.6 Margin Calls 158
5.4.7 Liquidity Management 159
5.4.8 Collateral 159
5.4.9 Client Asset Protection 160
5.5 CCP Structure and CCP Market Structure 161
5.5.1 Governance 162
5.5.2 Transparency 162
5.5.3 Accounting Practice of CCPs 162
5.5.4 Business Model: Costs 163
5.6 Outlook 163
5.6.1 The CCP Model Under Review 163
5.7 Final Word 165
Further Reading 165
Chapter 6: Securities Services: Settlement, Custody and Financing 166
6.1 Introduction 166
6.2 Basics 167
6.2.1 The Nature of the Business 167
6.2.2 Market-Structure Development 168
6.2.3 Securities Service Providers 170
6.3 Review of Risks mitigated by Securities Service Providers 172
6.3.1 Credit Risk 173
6.3.2 Liquidity Risk 175
6.3.3 Operational Risk 176
6.3.4 Legal Risk 176
6.3.5 Conclusion of Risk Review 176
6.4 Issuing Securities 178
6.4.1 Methods of Issuing Securities 178
6.4.2 Issuing via (International) Central Securities Depositories 179
6.4.2.1 Domestic Bonds 180
6.4.2.2 Foreign Bonds 180
6.4.2.3 “Eurobonds” 180
6.4.3 Identification of Securities 181
6.4.4 Closing and Distribution 182
6.5 Settling Transactions 182
6.5.1 Settlement and Finality 182
6.5.2 Types and Models of Settlement 183
6.5.3 Choice between Two Qualities of Settlement Funds 186
6.5.4 Cross-Border Settlement in Central Bank Money: TARGET2-Securities 186
6.6 Securities Financing 189
6.6.1 Regulatory Momentum 189
6.6.2 Basics of Securities Financing 189
6.6.3 Securities Services supporting Securities Financing 190
6.7 Custody Services 191
6.7.1 Safekeeping 192
6.7.2 Asset Servicing 194
6.7.2.1 Income Payment 195
6.7.2.2 Redemption Payments 196
6.7.2.3 Corporate Action Processing 196
6.7.3 Straight Through Processing and Automation 197
6.8 Conclusion 199
Chapter 7: Information Technology 201
7.1 Introduction 201
7.2 Core Processing 204
7.3 Transaction Interfaces 210
7.4 Market Data Interfaces 213
7.5 Exchange Connectivity 215
7.6 Member Infrastructure 220
7.7 Time Management and Performance Monitoring 222
7.8 Conclusion 225
Further Reading 226
Chapter 8: Contractual Relationships Across the Value Chain 227
8.1 The Trading Layer 227
8.1.1 Exchanges, Issuers and Trading Participants 228
8.1.2 Legal Relationship to Issuers 230
8.1.2.1 Balance Between Issuers’ Interests and Investor Protection 230
8.1.2.2 Admission of Securities to Trading 231
8.1.2.3 Post-admission Obligations of Issuers 232
8.1.3 Legal Relationships to Trading Participants 234
8.1.3.1 Trading Participants, Intermediaries and Investors 234
8.1.3.2 Admission of Trading Participants 234
8.1.3.3 Agreements with Market Makers 236
8.2 The Clearing Layer 238
8.2.1 CCPs, Clearing Members and Non-clearing Members 238
8.2.2 The Role of the CCP and Transactions in Central Clearing 239
8.2.3 Admission of Clearing Members 241
8.2.4 Legal Relationships to Clearing Members and Non-­clearing Members 243
8.2.4.1 Bilateral Clearing Agreements with Clearing Members 243
8.2.4.2 Tripartite Clearing Agreements with Clearing Members and Non-­clearing Members 245
8.2.4.3 Further Agreements 246
8.3 The Custody and Settlement Layer 247
8.3.1 CSDs and Their Customers 247
8.3.2 Legal Relationships to Customers 248
Chapter 9: Financial Market Regulation 250
9.1 Setting the Stage 250
9.2 Global Financial Market Supervisory Structure and Regulatory Processes 254
9.2.1 Global Supervisory Structure 255
9.2.1.1 The Group of 20 (G20) 256
9.2.1.2 The Financial Stability Board 257
9.2.1.3 International Standard Setting Bodies 258
9.2.1.4 European System of Financial Supervision 261
9.2.1.5 US System of Financial Supervision 264
9.2.2 Global Regulatory Processes 269
9.2.2.1 International Level 270
9.2.2.2 European Rulemaking Process 271
9.2.2.3 US Rulemaking Process 274
9.3 Effects of Regulation on the Value Chain of Market Operators 275
9.3.1 Markets in Financial Instruments Directive (MiFID I MiFID II/MiFIR)
9.3.2 European Market Infrastructure Regulation 278
9.3.3 Central Securities Depository Regulation 280
9.3.4 Capital Requirements Directive IV (CRD IV) 281
9.3.5 Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) 282
9.3.6 Regulatory Compliance and Enforcement 288
9.4 The Future of Regulation in the EU and the USA 290
9.4.1 The European Union 290
9.4.2 The USA 294
References 295
Further Reading 296
Official EU Documents 296
Part II: Trading of Financial Instruments: Selected Topics 298
Chapter 10: Security Market Microstructure: The Analysis of a Non-frictionless Market 299
10.1 Introduction 299
10.2 Microstructure’s Challenge 300
10.3 The Perfectly Liquid Environment of CAPM 303
10.3.1 The Expected Utility of End-of-Period Wealth 304
10.3.2 The Reservation Demand Curve 305
10.3.3 The Ordinary Demand Curve 306
10.3.4 The Risk Premium and the Market Price of Risk 306
10.3.5 The Investor’s Optimal Point on the Capital Market Line 307
10.3.6 The ith Risky Asset’s Point on the Security Market Line 308
10.4 What Microstructure Analysis Has to Offer: Personal Reflections 310
10.4.1 The Early Focus 310
10.4.2 The Current Focus 313
10.4.3 Future Directions 316
10.5 From Theory to Application 318
10.5.1 Technological Developments 319
10.5.2 Regulatory Initiatives 319
10.6 Deutsche Börse: The Emergence of a Modern, Electronic Market 320
10.6.1 The German Equities Market in the Mid-1990s 320
10.6.2 Designing a New Trading System 321
10.7 Conclusion: The Roadmap and the Road 324
10.8 Appendix 1: Risk Aversion and Risk Premium Measures 325
10.8.1 Risk Aversion 325
10.8.2 Risk Premiums 325
10.9 Appendix 2: Designing Xetra 327
10.9.1 Continuous Trading 328
10.9.2 Call Auction Trading 328
10.9.3 Electronic Trading for Less Liquid Stocks 329
10.9.4 Xetra’s Implementation and the Migration of Liquidity to Xetra Since 1997 330
References 330
Chapter 11: Exchanges: Link to the Real Economy 335
11.1 The Stock Markets Back in the Day: A Source and Instrument of State Power 335
11.2 The Stock Markets Today: A Catalyst to Economic Advancement 336
11.3 The Connection Between Exchanges and the Real Economy 339
11.4 Rational Expectations and Irrational Excesses 340
11.5 Asset Prices and Monetary Policy 342
11.6 Conclusion 344
References 344
Chapter 12: The Role of High-Frequency Trading in Modern Financial Markets 346
12.1 Definition of HFT and Differentiation to Algorithmic Trading 347
12.1.1 General HFT Definition 348
12.1.2 A Mathematical-Technical HFT Definition 349
12.2 HFT Trading Activities 355
12.2.1 Market Making/Liquidity Provision 355
12.2.2 Arbitrage 355
12.2.3 News Trading 356
12.2.4 Liquidity Detection Strategies 356
12.3 The Importance of Speed in Modern Financial Markets 357
12.4 Empirical Evidence on the Behavior of HFT 360
12.4.1 August 25th, 2011 Futures on DAX (FDAX) 362
12.4.2 April 6th, 2014, Futures on DAX (FDAX) 364
12.4.3 Effects of Low-Latency Participants Engaging in New Products 365
Bibliography 370
Chapter 13: High Frequency Trading: Market Structure Matters 371
13.1 The Evolution of Electronic Equity Trading Along the Value Chain 371
13.2 Algorithmic Trading and High Frequency Trading 375
13.2.1 Definitions and Delineations of Algorithmic Trading and High Frequency Trading 375
13.2.2 Main Strategies and Players 380
13.3 Equity Market Structures in the USA and in Europe 382
13.3.1 Commonalities of US and European Equity Market Structures 383
13.3.2 Main Differences Between US and European Equity Market Structures 386
13.4 Recent Markets Structure and Regulatory Initiatives Concerning HFT 389
13.4.1 Market Structure and Regulatory Initiatives Relating to HFT in the USA 390
13.4.2 Market Structure and Regulatory Initiatives Relating to HFT in Europe 392
13.5 Conclusion: Regulatory and Market Structure Convergence 394
References 396
Chapter 14: Global Developments in Equity Trading 399
14.1 Global Developments in Equity Derivatives 399
14.1.1 Form and Underlying Subject 399
14.1.2 Mutual Funds as the Original Equity Derivatives 400
14.1.3 Stock Indexes and Passive Investment Strategy 401
14.1.4 Individual Equity Options and Stock Index Options 402
14.1.5 Stock Index Futures, Options on Futures, and Single Stock Futures 404
14.1.6 Exchange Traded Funds (ETFs) 408
14.1.7 Over-the-Counter Equity Swaps 413
14.1.8 Securitized Derivatives 414
14.1.9 Emerging Innovations 415
14.1.10 What’s Next? 416
Chapter 15: From the End of Bretton Woods to the Global Financial Crisis: 40 Years of Turbulence 418
15.1 Introduction 418
15.2 Banks Under Bretton Woods 419
15.3 Bretton Woods Ends … 421
15.4 … And 1973 Changes Everything 421
15.5 Animal Spirits Return 422
15.6 Corporate Governance Outpaced 426
15.7 The Return of Turbulence 428
15.8 Catching Up with the Animal Spirit 430
15.9 A Rerun Avoided and Conclusions 432
Chapter 16: Risk and Representation: The Limits of Risk Management 435
16.1 Introduction1 435
16.2 Risk and Its Representation 437
16.3 Liquidity as an Information Problem 441
16.4 Liquidity as a Network Problem 442
16.5 Limited Knowledge and Second-Order Knowledge Traps 444
16.6 Standards 447
16.7 Concluding Remarks 449
Chapter 17: T2S: Creating a New Post-trade Landscape 451
Chapter 18: IT in Transition 461
18.1 Three Critical Factors 462
18.1.1 Implications for Securities Exchanges 463
18.1.2 Concerns on Systemic Failures 464
18.1.2.1 Flash Crash of May 6, 2010 464
18.1.2.2 Nasdaq’s Facebook IPO 464
18.1.2.3 Knight Capital Group 465
18.1.2.4 Everbright Securities 465
18.1.3 A Myriad of Challenges 465
18.2 Technical Drivers 467
18.2.1 What Are the Technical Drivers Shaping the Future of the Industry? 467
18.2.2 The Threat of Decentralised Business Models 467
18.2.3 Power to the User Where Everyone Is a Developer 468
18.2.4 Automation of Technology: The Complexity Grows but Is Hidden 469
18.2.5 Power to the Machines 469
18.2.6 Risks Increase from a Security and Complexity Viewpoint 469
18.2.7 Standards Drive Innovation 470
18.2.8 Data as the New Oil 470
18.3 Enterprise and Retail Behavioural Convergence 470
18.4 Technology-Fuelled Business Models 471
18.4.1 What Are Technology-Fuelled Business Models? 471
18.4.2 What Are the Key Functions Within a Business Platform? 472
18.4.3 What Are the Benefits? 473
18.4.4 Practical Examples of Applying This Approach 474
18.5 Implications for Enterprise IT in Financial Markets 474
18.5.1 Fostering the Appropriate Enterprise IT Culture 474
18.5.2 Progressive Openness Fosters Innovation 475
18.5.3 Everything as Service Through APIs 476
18.5.4 User Empowerment, Automation and Agility 476
18.5.5 Framework and Platform for Data Movement 476
18.5.6 Cognitive Computing and Machine Learning 477
References 477
Chapter 19: The Future of Finance: FinTech, Tech Disruption, and Orchestrating Innovation 478
19.1 Introduction: Finance and Information Technologies 478
19.2 The Rise of FinTech 479
19.3 FinTech: Areas of Disruption 480
19.4 Meet the Blockchain 483
19.5 The Typical Blockchain Process 485
19.6 The Implications of the Blockchain 487
19.7 UBS and the Blockchain 489
19.8 Conclusion: Collaboration Is Key 491
Chapter 20: Equity Capital Market Expectations of Corporate Issuers: The Fresenius Perspective 492
20.1 Introduction 492
20.2 The Importance of Efficient Equity Markets 492
20.3 Towards a Global Shareholder Base 493
20.4 The Trend Towards Professional Investing 493
20.5 The Relevance of Stock Indices 493
20.6 Efficient Markets as Public Goods 494
20.7 Building Trust in Capital Markets 494
20.8 Conclusion 494
Chapter 21: The Investment Process 495
21.1 The Investment Process 495
21.2 Investment Decision 497
21.2.1 Asset Liability Management 500
Chapter 22: Institutional Investors and Exchange Organizations 503
22.1 Introduction 503
22.2 Structure Organization 504
22.3 Institutional Investors and Exchanges 504
22.4 (Types of) Exchanges 506
22.5 Participants in a Trade and Transaction Costs 508
22.6 Why Institutional Investors Trade at Exchanges 511
22.7 Wrap-Up: Institutional Equity Investors and Exchanges 520
References 521
Chapter 23: Equity Market Fragmentation in the Swiss Market 522
23.1 Introduction 522
23.2 Data 523
23.3 Fragmentation and Market Quality 523
23.4 Information Processing 528
23.4.1 Hasbrouck Information Shares 530
23.4.2 Autoregressive Conditional Intensity Model 531
23.5 Conclusion 533
References 534
Chapter 24: Takeover Regulation as Part of a Functioning Equity Market 535
24.1 The Principles 535
24.2 The Jurisdictions 536
24.2.1 The European Takeover Directive 536
24.2.2 The Model of the UK 537
24.2.3 The German WpÜG 538
24.2.3.1 The 1979 Guidelines 538
24.2.3.2 The 1995 Takeover Code 539
24.2.3.3 The 2002 German Securities Acquisition and Takeover Act (“WpÜG”) 540
24.2.4 Switzerland 541
24.2.5 The 2014 Sika/Saint-Gobain Case 543
24.2.6 The US Solution 544
24.3 Outlook 545
24.3.1 “Acting in Concert” 546
24.3.2 Creeping In 546
24.3.3 “Parallel” Acquisitions of Securities (the McKesson/Celesio Case) 547
24.3.4 System of Legal Protection 547
24.3.5 The Role of Employees in a Takeover Situation 548
24.4 Conclusion 549
Chapter 25: Implementing MiFID2: The View of a Cash Equities Trading Venue 550
25.1 Introduction 550
25.2 MiFID1: From the Concentration Rule to Electronic Trading 552
25.2.1 The Development of MiFID1 552
25.2.2 Competition: The Holy Grail for MiFID1 552
25.2.3 The Undesired Consequences of MiFID1 554
25.3 MiFID2: From Electronic Trading to Transparency and the Strengthening of the Financial System 555
25.3.1 Electronic Trading 556
25.3.2 Transparency 556
25.3.2.1 Pre-trade Transparency 557
25.3.2.2 Post-trade Transparency 558
25.3.3 Other Topics Relevant for Cash Equity Trading 559
25.3.3.1 Trading Obligation for Shares 559
25.3.3.2 Transaction Reporting 559
25.4 From Good Intentions to Possible Overregulation 560
25.4.1 The Good Intentions of MiFID2 560
25.4.2 The Pitfalls of Overregulation 561
25.4.3 Possible Overregulation with MiFID2 562
25.4.3.1 Electronic Trading 562
25.4.3.2 Transparency 563
25.4.3.3 Other Aspects 563
References 564
Further Reading 565
Chapter 26: European Financial Integration: Monetary Union, Banking Union, Capital Markets Union 566
26.1 Introduction 566
26.2 The European Monetary Union in Crisis 567
26.2.1 Banks, Public Finances and the “Doom Loop” 567
26.2.2 Liability, Control and Lopsided Integration 568
26.2.3 Fiscal Union, Banking Union and Capital Markets Union? 569
26.3 Fiscal Union: Beyond the Horizon 569
26.4 Banking Union: A New World 571
26.5 Capital Markets Union: Tomorrow’s Reality? 571
26.6 Conclusion 573
References 573
Glossary 575