Financial Markets: “Trilemma” Competition-Quality-Regulation.

Abstract

Nowadays, in full application of the new regulatory framework on markets and financial instruments based on the MIFID II directive and the MIFIR regulation, aims at strengthening the current European regulation on securities markets by improving transparency, investor protection and seeks to ensure that organized negotiation is developed on regulated platforms. In this regard, the multiplicity of trading centers has negative effects on the goodness of the operation prices, decreases liquidity and increases the volatility of the quotes. The dissipation of liquidity, in episodes of high volatility and uncertainty, concludes in decline of the market quality and ultimately worsens the operation of the market. The current paper aims to conceptually put into question the current system before the proliferation of new trading systems and practices such as high frequency trading, an organized market structure is proposed which improves the current market transparency and quality frame, and eventually, reduce the systematic risk.