Mifid II cost disclosures pose risk to liquidity, warn banks

Dealers hope standardised methodology for some clients could mitigate impact

Dealers fear having to disclose costs on a trade-by-trade basis prior to execution will increase latency

Dealers have warned that Europe’s incoming cost disclosure requirements for over-the-counter derivatives trades will significantly increase trade latency and impact market liquidity for plain vanilla instruments. Banks are hoping regulators bless a standardised, grid-based methodology for trades with professional clients, which they say may help ease the burden.

The revised Markets in Financial Instruments Directive (Mifid II), which comes into force on January 3, 2018, requires banks to