Interview with Cees Vermaas, CEO and Chairman of NYSE Euronext Amsterdam

1. What do you expect MiFID 2 to change for your business? How will your business change as a result of MiFID 2?

Financial markets in Europe, and elsewhere in the world are in need of major overhaul. MiFID 2 is an opportunity for European legislators to identify areas where the market has not delivered because of regulatory loopholes, where the market has become more, rather than less fragmented and where too much opacity exists. New entrants (namely the new trading platforms that have emerged - MTFs) appear mature enough to abide by the same set of rules for pre-trading, execution and post-trading requirements. We have a once in a generation opportunity to take the lessons learned from this economic crisis and modernise our financial regulatory system to increase transparency and oversight and close the gaps in our regulatory structure so that average investors are protected.

2. With the liquidity becoming more fragmented, how do you think buy side behaviour will change the way markets are run?

What we have seen is a reshuffling of economic rents and bargaining power between market infrastructures and intermediaries. As players have repositioned themselves, various new trading mechanisms, including opaque trading, have been launched by infrastructures and intermediaries alike, with uncertain benefits for the overall public good. Visibly, the buy-side becomes more vocal in this process.

3. If you had a magic wand and could change one thing about the way markets operate, what would you do?

Centralised, systemic risk management: In the EU we support the ongoing financial supervision reform. NYSE Euronext supports the creation of the three European regulatory authorities which could play a pivotal role in improving regulatory coordination and harmonisation at a European level. Derivatives Clearing: We must require that standardised derivatives be centrally cleared – doing so will dramatically reduce risk to the system. Transparency and a level playing field: We all know there was simply not enough transparency in the multiple trading venues which are fragmented and abide by less onerous rules than the established exchanges. This has to be fixed. We urge the European Commission to address this seriously in the MiFID reform. International Coordination: Any changes to our regulatory regime must not place our markets or financial market participants at a competitive disadvantage from global counterparts. Global harmonisation will minimise regulatory arbitrage. Moreover the interests of end investors and issuers have to come first. MiFID has so far provided no benefit to these parties. Rather, we have seen a reshuffling of economic rents in the value chain, with intermediaries moving upstream to execution in order to defend their business and to justify their role to the buy side.

Cees Vermaas will be speaking at TradeTech Europe 2011 on 12 - 14 April, 2011. Visit www.tradetech.com for details.