It is interesting timing for a thought-piece on execution risk by the CEO of LSEG's CurveGlobal market.
Partly PR exercise, but mostly as cri de coeur on the current outlook for global markets in general and the European markets in particular, this piece is published the day after the European Commission announced that there would be no MiFID2/MiFIR equivalence for UK investment firms (save for limited short-term equivalence for UK central clearing counterparties (CCPs) in order to allow EU CCPs time to get their houses in order to clear business currently cleared in London) and not long after EU-based trading venue lobbying groups were able to delay (again) the introduction of what is known as "open access" for CCPs in the futures markets.
"Open Access" would allow trading firms the ability to select a CCP of their choice from a number of valid alternatives to clear trades on whichever market those trades took place.
In making the decision, ESMA, the pan-European securities regulator-of-regulators and rule-setter, stated that the current market environment, with a high degree of uncertainty and volatility driven by the COVID-19 pandemic, would negatively impact clearing houses and trading venues' operations and increase their operational risk, leading to it being "safer" to maintain the status quo of each venue having its own CCP through which trades must be cleared.
CurveGlobal, still a "challenger" venue, obviously has views on this. With the end of the Brexit transition period around the corner, and no sign of a deal, fragmentation of the markets will increase and we may look back at the uncertainty and volatility "driven by the COVIS-19 pandemic" as a period of relative calm. I am only half joking.
In a post or even mid-pandemic world, restricting trading to just one venue is the type of risk that few other markets would even consider, certainly cash equities and fixed income, where competition is rife, both in the exchange and over-the-counter worlds.