Catching Up with Technology - The Impact of Regulatory Changes on ECNs/MTFs and the Trading Venue Landscape in Europe

In recent years the landscape of trading venues has been transformed by technological advances. New trading concepts and infrastructures along the securities trading value chain have been established. With RegNMS ( Regulation National Market System ) in the US and MiFID (Markets in Financial Instruments Directive) in the EU coming into effect in 2006 and 2007 respectively, regulators on both sides of the Atlantic respond to these changes. Both new legislations try to catch up with recent years technological advances and intend to create a level playing field between the different types of trading venues and a harmonization in the order execution process. Against this background, the paper illustrates and analyses the regulatory environments and the impact of their upcoming changes on ECNs and MTFs (Multilateral Trading Facilities ) the European analogue of ECNs with a specific focus on Europe. Based on the framework of market microstructure theory and the existing market structures, the paper will develop scenarios on how the upcoming regulatory overhauls and recent technological improvements will alter the competitive landscape between Regulated Markets, ECNs / MTFs and order flow internalising entities