Brussels, 15 April 2014 Pasar Instrumen Keuangan Petunjuk (MiFID II): Pertanyaan yang Sering Diajukan A. Latar Belakang, elemen utama dan manfaat manfaat reformasi 1. Apa itu MiFID dan mengapa ditinjau hanya empat tahun setelah diberlakukannya MiFID adalah Pasar dalam Petunjuk Instrumen Keuangan (Petunjuk 200439EC 1). Ini menggantikan Petunjuk Layanan Investasi (ISD) yang diadopsi pada tahun 1993. Ini telah berlaku sejak tahun 2008. Ini adalah landasan peraturan EU mengenai pasar keuangan. Ini bertujuan untuk meningkatkan daya saing pasar keuangan UE dengan menciptakan satu pasar untuk layanan dan aktivitas investasi, dan memastikan perlindungan harmonis yang tinggi bagi investor di instrumen keuangan, seperti saham, obligasi, derivatif dan berbagai produk terstruktur. MiFID telah membawa persaingan yang lebih ketat di seluruh Eropa dalam penyediaan layanan kepada investor dan antara tempat-tempat perdagangan. Hal ini membantu berkontribusi pada pasar keuangan yang lebih dalam, lebih terintegrasi dan likuid. Ini juga menurunkan biaya bagi emiten, memberikan layanan yang lebih baik dan lebih murah bagi investor, dan berkontribusi terhadap pertumbuhan ekonomi dan penciptaan lapangan kerja di Eropa. Sesuai dengan tujuannya, MiFID telah berkontribusi pada pasar keuangan UE yang lebih kompetitif dan terintegrasi. Namun, peristiwa tahun lalu dan perkembangan pasar telah menunjukkan kelemahan dalam beberapa prinsip dasar MiFID, dan area yang disorot memerlukan penguatan atau revisi, misalnya, hal itu dapat dibilang mengarah pada pengembangan platform dan aktivitas perdagangan baru yang berada di luar jangkauan dan dengan demikian Di luar peraturan apapun Menutup celah semacam itu diperlukan untuk meningkatkan kepercayaan investor dan mencapai semua tujuan awal MiFID. Memastikan kerangka peraturan yang lebih kuat juga akan berfungsi untuk mengatasi kenyataan pasar yang lebih kompleks yang sekarang kita hadapi, sebuah kenyataan yang ditandai dengan meningkatnya keragaman dalam instrumen keuangan dan metode perdagangan baru. Diskusi serupa telah terjadi di Amerika Serikat dan pusat keuangan global utama lainnya dan telah menghasilkan respons peraturan yang kuat. 2. Apa saja elemen utama dari reformasi MiFID II yang bertujuan untuk membangun sistem keuangan yang lebih aman, lebih sehat, lebih transparan dan lebih bertanggung jawab yang bekerja untuk ekonomi dan masyarakat secara keseluruhan. Kontribusi utama yang diperkenalkan oleh MiFID II untuk mencapai tujuan ini adalah: (1) MiFID II memperkenalkan kerangka struktur pasar yang menutup celah dan memastikan bahwa perdagangan, jika sesuai, terjadi pada platform yang diatur. Untuk tujuan ini, ia membagori instrumen saham dan non-ekuitas menjadi kewajiban perdagangan. Selanjutnya memastikan bahwa perusahaan investasi yang mengoperasikan sistem pencocokan internal yang menjalankan perintah klien dalam saham, penerimaan penyimpanan, dana yang diperdagangkan di bursa, sertifikat dan instrumen keuangan serupa lainnya secara multilateral harus diberi wewenang sebagai fasilitas perdagangan Multilateral (MTF). Ini juga memperkenalkan tempat perdagangan multilateral baru, Fasilitas Perdagangan Terorganisir (OTF), untuk instrumen non-ekuitas untuk diperdagangkan di platform perdagangan multilateral yang terorganisir. Aturan ini memastikan tingkat lapangan bermain dengan Regulated Markets (RMs) dan MTFs. Netralitas operator OTF dipastikan melalui pembatasan penggunaan modal sendiri, termasuk perdagangan utama yang sesuai, dan kebijaksanaan dalam kebijakan pelaksanaannya. MiFID II memperkenalkan kewajiban perdagangan untuk saham serta kewajiban perdagangan untuk derivatif yang memenuhi syarat untuk melakukan kliring di bawah European Markets Infrastructure Regulation (EMO) (MEMO12232) dan cukup likuid. Ini akan memindahkan perdagangan instrumen ini ke platform multilateral dan teregulasi dengan baik sesuai dengan komitmen G20. (2) MIFID II meningkatkan transparansi pasar modal dan untuk pertama kalinya menetapkan prinsip transparansi instrumen non-ekuitas seperti obligasi dan derivatif. Untuk ekuitas, sebuah mekanisme volume double cap membatasi penggunaan harga referensi dan penawaran harga yang dinegosiasikan (4 per tempat tutup dan 8 tutup global) bersama dengan persyaratan untuk kenaikan harga pada titik tengah untuk yang pertama. Pengunduran diri dalam jumlah besar dan keringanan manajemen pesanan tetap sama seperti di bawah MiFID I. MiFID II juga memperluas rezim transparansi pra dan pasca perdagangan untuk memasukkan instrumen non-ekuitas, walaupun mengingat kekhususan instrumen non-ekuitas, Keringanan transparansi pra-perdagangan tersedia untuk pesanan besar, permintaan penawaran dan perdagangan suara. Transparansi perdagangan pasca disediakan untuk semua instrumen keuangan dengan kemungkinan publikasi atau penyaringan volume yang ditangguhkan sebagaimana mestinya. Aturan juga telah ditetapkan untuk meningkatkan konsolidasi dan pengungkapan data perdagangan yang efektif melalui kewajiban untuk tempat perdagangan untuk membuat data pra dan pasca perdagangan tersedia secara wajar dan melalui pembentukan mekanisme rekaman gabungan untuk data pasca perdagangan. . Aturan ini disertai dengan pembentukan mekanisme pelaporan yang disetujui (ARM) dan peraturan publikasi yang berwenang (APA) untuk pelaporan dan publikasi perdagangan. (3) Untuk memenuhi komitmen G20, MiFID II menyediakan kekuatan pengawasan yang diperkuat dan rezim batas-batas yang disesuaikan untuk turunan komoditas untuk meningkatkan transparansi, mendukung tertib penetapan harga dan mencegah penyalahgunaan pasar. Di bawah sistem ini, pejabat yang berwenang akan menetapkan batasan pada posisi sesuai dengan metodologi perhitungan yang ditetapkan oleh European Securities and Markets Authority (ESMA). Ini juga memperkenalkan kewajiban pelaporan posisi berdasarkan kategori pedagang. Ini akan membantu regulator dan pelaku pasar untuk memiliki informasi yang lebih baik tentang berfungsinya pasar-pasar ini. (4) Kerangka kerja baru akan memperbaiki kondisi persaingan dalam perdagangan dan pembukaan instrumen keuangan. Ini penting untuk integrasi pasar modal UE yang efisien dan aman. Untuk tujuan ini, MiFID II menetapkan sebuah rezim Uni Eropa yang harmonis untuk akses non-diskriminatif ke tempat-tempat perdagangan dan counterparties sentral (PKC). Tempat perdagangan yang lebih kecil dan PKC yang baru dibentuk akan mendapat keuntungan dari periode transisi opsional. Rezim akses non-diskriminatif juga akan diterapkan pada tolok ukur untuk tujuan perdagangan dan kliring. Aturan transisi akan menjamin kelancaran penerapan ketentuan ini. (5) MiFID II akan memperkenalkan kontrol perdagangan untuk aktivitas perdagangan algoritmik yang secara dramatis meningkatkan kecepatan perdagangan dan dapat menyebabkan risiko sistemik. Pengamanan ini mencakup persyaratan agar semua pedagang algoritmik diatur dengan benar dan memberikan likuiditas saat menjalankan strategi pembuatan pasar. Selain itu, perusahaan investasi yang menyediakan akses elektronik langsung ke tempat perdagangan diharuskan memiliki sistem dan pengendalian risiko untuk mencegah perdagangan yang dapat menyebabkan pasar kacau atau melibatkan penyalahgunaan pasar. (6) Perlindungan investor yang kuat dicapai dengan memperkenalkan persyaratan organisasi yang lebih baik, seperti perlindungan aset nasabah atau tata kelola produk, yang juga memperkuat peran badan manajemen. Rejim yang baru ini juga menyediakan peraturan perilaku yang diperkuat seperti ruang lingkup yang diperluas untuk uji kelayakan dan informasi yang diperkuat kepada klien. Saran independen jelas dibedakan dari nasehat dan pembatasan yang tidak independen yang dikenakan pada penerimaan komisi (bujukan). MiFID II juga memperkenalkan kekuatan dan kondisi yang harmonis untuk ESMA untuk melarang atau membatasi pemasaran dan distribusi instrumen keuangan tertentu dalam keadaan yang terdefinisi dengan baik dan kekuatan serupa untuk Otoritas Perbankan Eropa (EBA) dalam hal deposito terstruktur. Mengenai Produk Ritel Retail Investment Products (PRIPS), kerangka kerja baru ini juga mencakup simpanan terstruktur dan memperbaiki Petunjuk Mediasi Asuransi (IMD) untuk memperkenalkan beberapa peraturan untuk produk investasi berbasis asuransi. (7) Kesepakatan tersebut memperkuat rezim yang ada untuk memastikan sanksi administrasi yang efektif dan harmonis. Penggunaan sanksi pidana dibingkai sehingga menjamin kerjasama antara pihak berwenang dan transparansi sanksi. Sistem harmonisasi kerjasama yang diperkuat akan memperbaiki deteksi efektif pelanggaran MIFID. (8) Rezim yang harmonis untuk memberikan akses ke pasar UE untuk perusahaan dari negara ketiga didasarkan pada penilaian kesetaraan yurisdiksi negara ketiga oleh Komisi. Rezim tersebut hanya berlaku untuk penyediaan layanan dan aktivitas investasi lintas batas yang diberikan kepada mitra kerja profesional dan yang memenuhi syarat. Untuk masa transisi tiga tahun dan keputusan kesetaraan yang tertunda oleh Komisi, rezim negara ketiga nasional terus berlaku. 3. Biaya dan manfaat diantisipasi MiFID II MiFID II diperkirakan akan memberlakukan biaya kepatuhan satu kali antara 512 dan 732 juta dan biaya yang terus berlanjut antara 312 dan 586 juta per tahun. Ini merupakan dampak untuk biaya satu kali dan berkelanjutan yang tidak melebihi 0,15 dari total pengeluaran operasional di sektor perbankan UE. Ini hanya sebagian kecil dari biaya yang dikenakan pada saat diperkenalkannya MiFID. Dampak biaya satu kali dari pengenalan MiFID diperkirakan sekitar 0,6 persen (bank ritel dan tabungan) dan 0,7 persen (bank investasi) dari total pengeluaran operasional. Biaya kepatuhan berulang diperkirakan sekitar 0,1 persen (bank ritel dan tabungan) sampai sekitar 0,2 persen (bank investasi) dari total pengeluaran operasional. Manfaat utama MiFID II akan sangat nyata, namun tidak mudah dihitung. Manfaat lapangan kerja tingkat membaik, transparansi pasar yang meningkat, transparansi yang lebih baik terhadap regulator dan kekuatan yang lebih kuat untuk regulator, peningkatan perlindungan investor dan kepercayaan investor tersirat di pasar keuangan, dan pengurangan risiko yang diambil dan dampak yang terkait pada Stabilitas keuangan pasar keuangan UE adalah keuntungan nyata, yang hampir tidak mungkin untuk menempatkan angka. B. Struktur pasar yang lebih kuat dan efisien 4. Bagaimana perkembangan dalam perdagangan di luar tempat-tempat yang dikategorikan dalam MiFID II ditangani Bagaimana perdagangan derivatif OTC standar ditangani Sebagian besar perdagangan saat ini dilakukan di luar tempat MiFID, pada Basis over-the-counter, terjadi pada platform broker yang beroperasi di pasar. Ini adalah platform terorganisir dan tidak diatur dimana instrumen keuangan semakin diperdagangkan. Hal ini menghambat proses pembentukan harga yang efektif. MiFID II menangani masalah ini dengan berbagai cara. Sehubungan dengan ekuitas, saham tersebut tunduk pada kewajiban perdagangan. Selanjutnya memastikan bahwa perusahaan investasi yang mengoperasikan sistem pencocokan internal yang menjalankan perintah klien dalam saham, penerimaan penyimpanan, dana yang diperdagangkan di bursa, sertifikat dan instrumen keuangan serupa lainnya secara multilateral harus diberi wewenang sebagai fasilitas perdagangan Multilateral (MTF). Transaksi bilateral akan dilakukan pada internalisers yang sistematis. Karena tidak ada yang namanya, MiFID II memperkenalkan kategori platform baru, sebuah fasilitas perdagangan terorganisir (OTF). Untuk mengatur dengan benar semua jenis perdagangan terorganisir dalam instrumen ini dan untuk tingkat lapangan bermain di UE. Tempat baru ini akan tunduk pada persyaratan inti yang sama untuk pengoperasian tempat perdagangan sebagai platform lain yang ada. Hal ini didefinisikan secara luas untuk menangkap semua bentuk perdagangan terorganisir dalam ketiadaan yang tidak sesuai dengan kategori yang ada. Perdaganan perdagangan OTF tidak akan diizinkan kecuali utang negara yang tidak likuid. Perdagangan pokok yang sesuai akan tersedia bila klien mengizinkan, kecuali untuk transaksi derivatif sesuai dengan kewajiban kliring sesuai dengan EMIR. Sebagai tambahan, MiFID II mewajibkan semua derivatif standar untuk diperdagangkan di tempat yang terorganisir dan transparan, yaitu di pasar yang diatur, MTF dan OTFs. Akibatnya, semua perdagangan terorganisir, dengan kata lain perdagangan yang berlangsung dalam sistem, yang saat ini berlangsung di luar tempat yang diatur akan di masa depan dilakukan di tempat-tempat yang diatur. Internaliser sistematik juga merupakan bagian dari perdagangan di luar platform. Mereka adalah perusahaan investasi yang berurusan dengan klien mereka secara terorganisir, dengan kata lain perdagangan apa pun yang melampaui kesepakatan ad hoc. Untuk mempertahankan tingkat lapangan bermain dan mendukung penemuan harga pasar secara luas, MiFID II memperluas peraturan transparansi khusus untuk perusahaan investasi yang bertindak sebagai pengurus internal yang sistematis di luar instrumen ekuitas selain saham yang peraturan transparansi SI sudah ada di bawah MIFID. I. Aturan transparansi baru untuk SIs juga diperkenalkan untuk non-ekuitas, termasuk obligasi, produk keuangan terstruktur, tunjangan emisi dan derivatif yang diperdagangkan di tempat perdagangan dan dimana ada pasar cair. 5. Bagaimana perdagangan derivat OTC standar dipindahkan ke tempat-tempat yang terorganisir sesuai dengan komitmen G20 Komitmen G20 menyatakan bahwa semua kontrak derivatif OTC standar harus diperdagangkan di bursa atau platform perdagangan elektronik, jika sesuai, dan dibersihkan melalui mitra sentral pada akhir Dari 2012. Untuk memenuhi komitmen ini di Eropa, semua perdagangan derivatif yang memenuhi syarat untuk pembukaan dan yang cukup likuid harus beralih ke pasar yang diatur, Fasilitas Perdagangan Multilateral atau ke fasilitas perdagangan baru yang terorganisir (OTFs). Otoritas Pasar dan Pasar Eropa (ESMA) harus menilai dan menentukan kapan turunan yang memenuhi syarat untuk kliring cukup likuid untuk diperdagangkan secara eksklusif di tempat perdagangan tersebut. Kriteria yang tepat untuk penilaian semacam itu perlu dipertimbangkan oleh ESMA. Pendekatan ini harus pragmatis dan cukup progresif untuk memperhitungkan kekhususan perdagangan masing-masing derivatif sambil memenuhi komitmen G20. 6. Apa yang diusulkan untuk kliring dan akses terhadap infrastruktur pasca-perdagangan Isu yang dipertaruhkan adalah tentang persaingan, stabilitas dan integrasi infrastruktur pasar UE. Meskipun model integrasi vertikal dari infrastruktur perdagangan dan pasca-perdagangan dapat menunjukkan keuntungan dalam hal koordinasi, namun juga dapat memperkenalkan inefisiensi sehubungan dengan persaingan dan transparansi harga. Pengenalan persyaratan akses non-diskriminatif dalam Peraturan tentang derivatif OTC, counterparties pusat dan repositori perdagangan (yang dikenal sebagai Peraturan Infrastruktur Pasar EMIR - Eropa lihat MEMO12232) adalah tanggapan terhadap efek negatif potensial ini. Sementara EMIR hanya mencakup derivatif OTC, MiFID II akan mencakup semua instrumen keuangan. Tempat perdagangan akan diminta untuk menyediakan akses, termasuk umpan data yang bersifat non-diskriminatif kepada mitra sentral (counterpartparters / CCPs) yang ingin menghapus transaksi yang dilakukan di tempat perdagangan dan PKC akan diminta untuk menghapus transaksi yang dilakukan di tempat perdagangan yang berbeda sesuai dengan ketentuan tertentu. Kondisi yang terdefinisi dengan baik. Ini misalnya, pengaturan akses tidak memerlukan pengaturan interoperabilitas (persyaratan tidak dapat dikenakan pada PKC yang harus mereka hubungkan dan cross-margin) dalam kasus derivatif yang diperdagangkan di bursa, dan hal itu tidak mengancam kelancaran dan tertib. Berfungsinya pasar, terutama karena fragmentasi likuiditas. Masalah fungibilitas akan diklarifikasi lebih lanjut: yaitu di mana keadaan kontrak dapat terjaring atau kurang diminimalkan. Aturan-aturan ini diperlukan untuk memastikan bahwa PKC tidak dapat menolak akses secara berlebihan dengan mengacu pada tidak adanya fungibilitas dan pada saat yang sama memberikan kejelasan lebih pada kapan PKC harus bersih atau melewati batas. Untuk memastikan konsistensi dengan ketentuan akses di bawah EMIR, yang mencakup derivatif OTC, disepakati untuk menyesuaikan persyaratan sehingga standar teknis peraturan untuk MIFIR dan EMIR harus sama. Pengaturan transitory telah diperkenalkan sehubungan dengan pertukaran derivatif yang diperdagangkan. Komisi harus menilai enam bulan sebelum masuk ke aplikasi apakah derivat yang diperdagangkan bursa harus dikeluarkan dari ruang lingkup (untuk jangka waktu maksimum 30 bulan) berdasarkan penilaian risiko. Jika menemukan bahwa tidak ada alasan untuk mengesampingkannya, PKC atau tempat perdagangan mungkin masih meminta otoritas yang kompeten untuk tidak tunduk pada kewajiban akses (transisi 30 bulan lagi) dengan memperhatikan risiko sistemik. MiFID II juga memastikan akses non-diskriminatif terhadap tolok ukur dimana beberapa turunan dibuat. Untuk tolok ukur baru, kewajiban tersebut dimulai 30 bulan setelah penggunaannya yang pertama. Bersama-sama peraturan ini akan mencegah praktik yang diskriminatif dan membantu menghilangkan hambatan yang menghambat persaingan dalam pembukaan instrumen keuangan. Akibatnya, penyedia yang ada atau yang baru akan mampu bersaing memperebutkan layanan perdagangan atau kliring sentral. Untuk memastikan bahwa beban lingkungan peraturan baru bertahap secara proporsional, untuk derivatif perdagangan bursa dan tempat perdagangan yang berada di bawah ambang batas yang relevan, dan untuk sekuritas yang dapat dipindahtangankan, PKC yang baru dibentuk dapat memanfaatkan masa transisi 30 bulan . 7. Bagaimana kebutuhan untuk meningkatkan akses UKM terhadap pasar modal dipertimbangkan Usaha kecil dan menengah (UKM) di seluruh Eropa memberikan kontribusi signifikan terhadap pertumbuhan ekonomi, ketenagakerjaan, inovasi dan integrasi sosial. Dua sumber utama pendanaan untuk perusahaan semacam itu adalah pembiayaan swasta oleh bank atau institusi lain dan meningkatkan pembiayaan melalui pasar modal (misalnya penerbitan saham). Pasar UKM bertujuan untuk menyediakan perusahaan-perusahaan kecil yang tumbuh dengan platform untuk meningkatkan modal baik melalui penawaran awal dan penggalangan dana yang sedang berlangsung. Namun, tidak semua pasar ini telah berhasil. Untuk memfasilitasi akses pasar modal bagi UKM yang lebih baik, MiFID II memperkenalkan label khusus untuk pasar UKM dengan menciptakan pasar tailor-made baru untuk UKM, di bawah kerangka MTF. Pendaftaran pasar ini harus meningkatkan visibilitas dan profil mereka dan juga mengarah pada standar peraturan pan-Eropa yang umum yang disesuaikan dengan kebutuhan emiten dan investor di pasar ini sambil mempertahankan tingkat perlindungan investor tingkat tinggi yang ada. Ini juga akan memberikan label yang berkualitas untuk platform yang bertujuan untuk memenuhi kebutuhan UKM. C. Memperhitungkan inovasi teknologi 8. Bagaimana masalah yang diangkat oleh perdagangan frekuensi algoritmik dan frekuensi tinggi ditangani Algoritma perdagangan adalah bentuk perdagangan dimana algoritma komputer secara otomatis memutuskan untuk melakukan pemesanan dengan intervensi minimal atau tanpa manusia. Bentuk penting dari perdagangan algoritmik adalah perdagangan dengan frekuensi tinggi, di mana sistem perdagangan menganalisis pasar dengan kecepatan tinggi dan kemudian mengirimkan sejumlah besar pesanan dengan sangat cepat. MiFID II memperkenalkan serangkaian pengamanan baik pada pelaku pasar yang menggunakan algoritma sebagai bagian dari strategi perdagangan mereka maupun pada tempat perdagangan dimana perdagangan frekuensi dan frekuensi tinggi terjadi: (1) Persyaratan informasi oleh regulator terhadap strategi berbagai pedagang algoritmik Akan ditingkatkan, dan pemeriksaan ketat akan dikenakan pada pengaturan dimana anggota tempat perdagangan mengizinkan perusahaan lain menggunakan algoritme untuk mengakses pasar umum melalui sistem mereka (akses elektronik langsung). Saat ini, regulator tidak mengetahui jenis strategi yang digunakan, dimana strategi dibuat, dan anggota mungkin tidak memeriksa strategi apa yang digunakan orang-orang yang menggunakan sistem mereka dan bagaimana orang-orang mengendalikan strategi mereka. (2) Pedagang Algoritma harus terdaftar sebagai perusahaan investasi dan menerapkan sistem dan pengendalian risiko yang efektif. Ketika terlibat dalam strategi pembuatan pasar, mereka diminta untuk memberikan penawaran harga kompetitif untuk memberikan likuiditas secara reguler yang akan memberi kontribusi pada perdagangan yang lebih teratur. (3) Tempat perdagangan juga diperlukan untuk memiliki kontrol yang kuat terhadap masalah seperti perdagangan yang tidak teratur, pergerakan harga yang tidak menentu, dan kelebihan kapasitas. Untuk mengurangi yang terakhir, pembatasan seberapa jauh venue dapat bersaing dalam menarik arus pesanan akan dikenakan misalnya dengan mengurangi ukuran dimana harga naik atau turun (ukuran kutu) atau melalui desain struktur biaya mereka. (4) Akhirnya, MiFID II akan meminta venue untuk bisa menghentikan perdagangan jika terjadi pergerakan harga yang signifikan (circuit breaker) secara harmonis. D. Transparansi yang meningkat 9. Apa proposal untuk meningkatkan transparansi pasar ekuitas, termasuk masalah kolam gelap Di semua pasar, pembeli perlu mengetahui permintaan penjual dan sebaliknya. Namun, transaksi grosir sering dilakukan dengan harga non-publik. Hal yang sama berlaku untuk instrumen keuangan. Oleh karena itu, kolam gelap, atau platform tempat minat perdagangan berinteraksi tanpa pengungkapan pra-perdagangan penuh kepada pengguna lain atau masyarakat umum, merupakan fitur umum pasar keuangan. MiFID II terus membiarkan keringanan dari transparansi pra-perdagangan, namun hanya selama tidak menimbulkan distorsi yang kompetitif dan mengurangi keseluruhan efisiensi proses penemuan harga. Regulator keuangan dapat memberikan keringanan dari kewajiban transparansi untuk: (i) transaksi yang berskala besar dibandingkan dengan ukuran pasar normal (cekungan dalam ukuran besar) (ii) sistem dimana harga ditentukan dengan mengacu pada harga yang dihasilkan oleh sistem lain (referensi (Iii) sistem yang memformalkan transaksi yang dinegosiasikan, asalkan memenuhi kriteria tertentu (wudan harga yang dinegosiasikan) (iv) pesanan yang diadakan di fasilitas pengelolaan pesanan di tempat perdagangan sambil menunggu pengungkapan (keringanan manajemen pesanan). Untuk menghindari dampak negatif pada proses pembentukan harga dan untuk memastikan bahwa perdagangan saham dilakukan di tempat yang diatur secara transparan semaksimal mungkin, penggunaan keringanan tunduk pada pembatasan tertentu. MiFID II memperkenalkan mekanisme topi volume ganda yang membatasi penggunaan keringanan harga referensi dan keringanan harga yang dinegosiasikan (4 per tempat tutup dan 8 tutup global). Selain itu, penggunaan pembebasan harga referensi tunduk pada mekanisme peningkatan harga, yaitu perintah harus disesuaikan pada titik tengah dalam tawaran saat ini dan harga penawaran dari tempat perdagangan. Bila harga titik tengah tidak tersedia, pesanan bisa dicocokkan pada harga buka atau penutupan dari sesi perdagangan yang relevan. Pembatasan ini tidak berlaku untuk keringanan untuk transaksi dalam skala besar karena melindungi investor yang menjual sejumlah besar saham (juga tidak menerapkannya sehubungan dengan fasilitas pengelolaan pesanan). Harus mengungkapkan pesanan besar akan menggerakkan pasar turun, yang berarti mereka akan menjual dengan harga lebih buruk. Kondisi spesifik, di mana pengabaian dapat beroperasi, seperti untuk saham hari ini, didefinisikan dalam menerapkan langkah-langkah. Akhirnya, MiFID II memperluas rezim transparansi menjadi indikasi kepentingan yang dapat ditindaklanjuti, instrumen ekuitas selain saham, termasuk penerimaan penyimpanan, dana dan sertifikat yang diperdagangkan. Aturan transparansi yang ada untuk internaliser yang sistematis akan terus berlaku terhadap saham, sementara ketentuan baru diperkenalkan untuk instrumen mirip ekuitas (seperti tanda terima penyimpanan, ETFs (exchange traded funds), sertifikat). 10. Apakah pengenalan rekaman konsolidasi wajib untuk data perdagangan dipertimbangkan Pelaporan, publikasi dan konsolidasi data perdagangan perlu ditangani karena masalah dengan format, biaya, kualitas dan keandalannya. Data perdagangan membantu investor untuk menemukan harga yang tepat saat mencari untuk membeli atau menjual, dan untuk memeriksa apakah mereka mendapatkan harga terbaik dengan membandingkan harga yang mereka dapatkan dengan harga pasar lainnya. MiFID II memperbaiki situasi dengan memperkenalkan langkah-langkah untuk memastikan kualitas dan konsistensi data serta langkah-langkah untuk mengurangi biaya data. Sebuah kaset konsolidasi wajib memberikan catatan perdagangan eksekusi yang konsisten dan dapat diandalkan akan ditetapkan oleh penyedia data yang berwenang melakukannya berdasarkan standar harmonis yang ditetapkan dalam MiFID. Berdasarkan data perdagangan ini untuk seluruh UE, investor akan dapat membuat pilihan yang lebih tepat. 11. Bagaimana persyaratan transparansi pra dan pasca perdagangan melampaui saham dan mengapa Saat ini, MiFID memberlakukan persyaratan transparansi pra dan pasca perdagangan yang disesuaikan hanya pada saham yang mengaku diperdagangkan di pasar yang diatur. MiFID II juga memasukkan persyaratan untuk instrumen lainnya, yaitu untuk instrumen ekuitas selain saham yang mengaku melakukan perdagangan di pasar yang diatur (tanda terima penyimpanan, dana yang diperdagangkan, sertifikat dll) dan tidak ada ketentuan (obligasi, produk keuangan terstruktur, tunjangan emisi dan derivatif yang diperdagangkan Di tempat trading). Karena struktur pasar yang berbeda dalam instrumen non-ekuitas dibandingkan dengan ekuitas, rezim transparansi yang tepat dikalibrasi untuk berbagai tipe instrumen dan model perdagangan. Pengecualian akan tersedia untuk pesanan skala besar, pesanan yang diadakan di fasilitas manajemen pesanan, derivatif yang tidak tunduk pada kewajiban perdagangan dan instrumen kelayakan yang tidak ada pasar cair. Pelepasan juga dapat diberikan untuk indikasi ketertarikan pada sistem permintaan untuk penawaran dan perdagangan suara yang berada di atas ukuran yang spesifik untuk instrumen tersebut, yang akan mengekspos penyedia likuiditas ke risiko yang tidak semestinya. Dalam hal ini, tempat perdagangan membuat publik setidaknya tawaran pretrade indikatif dan harga penawaran. Persyaratan transparansi pretrade harus ditentukan lebih lanjut dalam menerapkan langkah-langkah. Persyaratan pasca perdagangan, yang akan dijelaskan secara rinci dalam pelaksanaan undang-undang, akan berlaku untuk semua obligasi dan produk keuangan terstruktur serta semua derivatif yang diperdagangkan di tempat perdagangan. Publikasi rincian transaksi dapat ditangguhkan dalam keadaan yang ditentukan. Persyaratan pra-perdagangan, yang juga harus diperinci lebih lanjut dalam menerapkan undang-undang, dipaksakan untuk instrumen seperti instrumen dan instrumen taksiran ekuitas saat ditawarkan oleh perusahaan investasi yang bertindak sebagai internaliser dalam perdagangan over-the-counter. Alasan untuk memperkenalkan persyaratan transparansi pra dan pasca perdagangan untuk instrumen ini adalah bahwa tidak adanya persyaratan transparansi yang harmonis di pasar ini telah dirasakan oleh banyak orang, termasuk regulator sekuritas EU, untuk menghasilkan formasi harga yang tidak efisien dan tidak adil dan risiko yang lebih tinggi. Daripada yang seharusnya terjadi. 12. Apakah MIFID II merupakan awal dari peraturan harga di bidang data pasar Pelaku pasar memerlukan data aktivitas perdagangan, harga dan volume untuk membuat keputusan tentang bagaimana dan kapan harus berinvestasi. Data harus tersedia secara setara dan mudah diakses. Saat ini, berbagai insentif ada bagi penyedia data dan vendor untuk menjual datanya sesuai tarif atau dengan cara yang tidak sesuai dengan basis komersial yang wajar atau dengan konsolidasi data langsung dengan data serupa dari sumber lain yang diimpikan MiFID. MiFID II memberikan pada tujuan ini. Menerapkan undang-undang akan menentukan lebih jauh basis komersial yang masuk akal untuk membuat rezim tersebut efektif. E. Kekuatan pengawasan yang diperkuat dan kerangka kerja yang lebih ketat untuk pasar derivatif komoditas 13. Bagaimana MIFID II mengatur turunan komoditas Pertama, tunjangan emisi telah dibawa ke dalam lingkup MIFID (lihat pertanyaan 14 di bawah) dan definisi instrumen keuangan telah diperluas Untuk memasukkan kontrak komoditas yang dapat diselesaikan secara fisik yang diperdagangkan di tempat perdagangan MIFID, termasuk OTF yang baru didirikan. Kedua, lebih sedikit perusahaan komoditas akan dibebaskan dari MiFID II ketika mereka menangani sendiri akun mereka di instrumen keuangan atau memberikan layanan investasi pada derivatif komoditas berdasarkan tambahan sebagai bagian utama mereka. Bisnis dan kapan mereka bukan anak perusahaan kelompok keuangan. Peraturan baru mempersempit pembebasan yang ada untuk kepentingan pengawasan peraturan dan transparansi yang lebih besar dengan mempertimbangkan perlunya pembebasan terus-menerus untuk perusahaan komersial dan risiko yang ditimbulkan oleh para pemain ini. Ketiga, MiFID II menyediakan kekuatan pengawas yang diperkuat dan batas posisi yang selaras membatasi pasar komoditas derivatif untuk mendukung penetapan harga yang tertib dan mencegah penyalahgunaan pasar. Ini akan membantu regulator dan pelaku pasar untuk memiliki informasi yang lebih baik tentang berfungsinya pasar-pasar ini. Kekuatan yang harmonis dan komprehensif diberikan kepada regulator keuangan untuk memantau dan melakukan intervensi pada tahap apapun dalam aktivitas perdagangan di semua derivatif komoditas, termasuk dalam bentuk batasan posisi yang ditetapkan sesuai dengan metodologi ESMA untuk perhitungan jika ada kekhawatiran dalam hal integritas pasar atau tertib Fungsi pasar. Tempat-tempat yang menawarkan perdagangan derivatif komoditas juga diharuskan untuk menerapkan kontrol manajemen posisi transparan dan non-diskriminatif yang sesuai pada platform mereka, untuk memantau posisi dan, jika perlu, meminta pemegang untuk mengurangi atau menghentikan posisi atau untuk memberikan likuiditas kembali ke pasar. Rincian kontrol ini harus dikomunikasikan ke ESMA. MIFIF II meningkatkan transparansi aktivitas perdagangan di semua tempat perdagangan terorganisir dengan memperkenalkan kewajiban pelaporan posisi berdasarkan kategori pedagang. Informasi yang harmonis dan terpilah ini akan membantu regulator dan pelaku pasar untuk menilai peran arus keuangan di pasar ini secara lebih baik. Selain itu, persyaratan transparansi pra dan pasca perdagangan diperluas ke derivatif yang diperdagangkan di tempat perdagangan, termasuk derivatif komoditas. Juga, perdagangan wajib di tempat-tempat yang terorganisir akan berlaku untuk derivatif komoditas. 14. Mengapa tunjangan emisi sekarang termasuk dalam lingkup MiFID dan Trading Directive Market Abuse dalam derivatif tunjangan sudah berada di bawah cakupan MiFID dan Market Abuse Directive (IP14424). Dengan sekarang membawa tunjangan emisi di bawah kerangka kerja yang sama, peraturan mengenai perdagangan tunjangan emisi (EUA), pasar spot akan disesuaikan dengan apa yang berlaku untuk pasar derivatif EUA. Bersama-sama, MiFID dan peraturan tentang penyalahgunaan pasar memberikan kerangka kerja komprehensif untuk perdagangan instrumen keuangan dan integritas pasar. Perluasan ke EUA akan mengenalkan keamanan yang lebih besar bagi para pedagang EUA namun tanpa mengganggu tujuan pasar, yang tetap mengurangi emisi. 15. Kontrak energi apa yang tercakup dalam MiFID II, yang dikecualikan dan mengapa Proposal Komisi memasukkan sebagai instrumen keuangan semua kontrak komoditas diperdagangkan di semua jenis tempat perdagangan dan yang dapat diselesaikan secara fisik berada dalam lingkup MiFID II. Ini karena instrumen ini secara ekonomi setara dengan instrumen keuangan dan dapat digunakan seperti instrumen keuangan dan menimbulkan risiko serupa. However the final text excludes wholesale energy contracts covered under the Regulation on the integrity and transparency of the market wholesale energy (REMIT) because these contracts are subject to a certain level of regulation and supervision comparable with financial markets legislation and so their exclusion is justified as a proportional amendment to avoid unnecessary dual regulation. Oil and coal physically settled contracts are not however subject to similar legislation and so will be included as financial instruments for the purposes of MiFID II and therefore subject, amongst other things, to position limits and transparency requirements. However, many of these contracts are not currently cleared and so to ensure a smooth transition, the application of EMIR provisions to these physically settled oil and coal contracts traded on an OTF are deferred. The EMIR provisions will not apply for six years after the entry into force of MiFID II. This transition period can be extended once by two years and once by one year. Before taking any decision on the extension or non-extension of this initial transition period by two years, the Commission will have to assess the potential impact on the energy prices as well as the benefits in terms of reducing counterparty and systemic risks and if necessary propose legislative solutions. F. Reinforced supervisory powers and a stricter framework for commodity derivative markets 16. What role will ESMA play in relation to the revised MiFID ESMA already plays an important role in advising the Commission on possible regulatory changes and in ensuring convergent application of the rules across Member States. Many of the proposed changes in MiFID II stem from advice received from ESMA, and it is foreseen that it will play a major part in developing most of the technical implementing measures necessary to ensure the full functioning of the regulatory framework. In terms of specific supervisory tasks, ESMA has an increased role in, for example, determining the conformity with MiFID II of individual cases where venues propose to waive pre-trade transparency (dark pools). In accordance with the mandate defined in the ESMA regulation and in line with ESMA powers conferred in the Regulation of 14 March 2012 on short selling and certain aspects of credit default swaps ( MEMO11713 ), it will also take any steps necessary to coordinate actions by national competent authorities with regard to waivers from pretrade transparency, products considered risky from the point of view of investor protection or financial stability as well as positions in commodity derivatives by specific market participants deemed excessively large. 17. What purpose does transaction reporting serve and what measures are being proposed Investment firms have to report all their trades to competent authorities (in all financial instruments that are admitted to trading on a regulated market or MTF as well as those traded on an MTF or OTF). This obligation also applies to financial instruments where the underlying is a financial instrument traded on a trading venue, an index or a basket composed of financial instruments traded on a trading venue. This means that the reporting obligation applies regardless of where the trade takes place. This system of transaction reporting enables supervisors to monitor the activities of investment firms, which helps them to ensure compliance with MiFID II, and to monitor for abuses under the Market Abuse Regulation. Because transaction reporting mainly serves the purposes of supervision, the requirements under MiFID II mirror the scope of the Market Abuse Regulation. To this end, MiFID II extends the scope of transaction reporting to all financial instruments, with the exception of instruments which are not susceptible to or could not be used for market abuse. Second, reporting requirements today diverge between Member States, which adds costs for firms and limits the use of trade reports for competent authorities. By including the reporting requirements in MiFIR, the requirements are further harmonised, notably the information that identifies who is trading and for whom a trade is being executed. Also, ESMA is empowered to propose technical standards on a common European transaction reporting format and content. Finally, for cost and efficiency purposes, double reporting of trades under MiFID II and the reporting requirements to trade repositories should be avoided. MiFID II proposes that a trade already reported to a repository will not need to be reported again under MiFID II, provided all the necessary information is thereby available to competent authorities. G. Stronger investor protection 18. How will MiFID II better protect investors MiFID includes a number of measures aimed at protecting investors in the context of the provision of investment services. Those rules take into account the type of services (for instance, investment advice or execution of orders) and the classification of clients, with higher protection granted to retail clients. The MiFID rules include both conduct of business requirements (for instance, collecting sufficient information to ensure that the products provided are suitable or appropriate for the client) and organisational requirements (for instance, requirements to identify and manage any conflicts of interest). However, modifications and improvements are introduced to strengthen the framework for the provision of services. First, the scope of the Directive is broadened in order to cover financial products outside the scope of MiFID I but which satisfy similar investor needs and raise comparable investor protection challenges. In the future, the sale of structured deposits will have to comply with several MiFID requirements, and in particular with conduct of business and conflicts of interest rules. MiFID II will also extend some of the information to clients and conflict of interest requirements to insurance-based investment products by amending the Insurance Mediation Directive 200292EC. Second, conduct of business requirements are modified in order to grant additional protection to investors. The rules for investment advice are improved both when advice is provided on an independent basis and in the long term. Advisers declaring themselves as independent will need to match the clients profile and interests against a broad array of products available in the market and say whether they will provide the client with a periodic assessment of the suitability of advised products. Independent investment advisers and portfolio managers will be required to transfer all fees, commissions or any monetary benefits paid or provided by a third party to the client who should be accurately informed about all such commissions. The conditions for services where investors receive less protection from firms are more limited. In particular, the Directive clarifies the conditions and situations in which investors are able to transact freely in certain non-complex instruments with minimal protection afforded by investment firms. Third, organisational requirements for the provision of services to investors are strengthened. For instance, the involvement of senior management in the design of the firms policies as to how products and services may be sold or provided to their clients and the adoption of adequate internal controls is consolidated. Also, MiFID II introduces harmonised powers and conditions for national competent authorities, the European Securities and Markets Authority (ESMA) and the European Banking Authority (EBA) to prohibit or restrict the marketing and distribution of certain financial instruments and structured deposits, financial activities or practices in case of threats to investor protection, financial stability or the orderly functioning of markets. 19. Will UCITS be included under MiFID as a result of the MiFID review Will the classification of some UCITS as complex instruments change their status under the UCITS directive Shares or units in UCITS (Undertakings for Collective Investments in Transferable Securities) are financial instruments and therefore investment services relating to them are already fully covered under MiFID. The issue which is addressed in the MiFID review concerns their classification as complex or non-complex instruments. The distinction is relevant in order to establish the application of the execution-only regime, under which investment firms or banks selling certain instruments are subject to less stringent rules for the protection of retail investors. In particular they are not obliged to assess whether the client has the knowledge and experience to understand the financial instrument the so-called appropriateness test. The execution only regime only applies to non-complex financial instruments. So far, all UCITS have been classified as non-complex instruments. In the meantime, however, certain UCITS have become more complex and the UCITS legislation itself reflected the separate and distinct characteristics of such structured UCITS which, on account of their pay-off formula raise additional challenges for investors to understand how they operate. For this reason - for the mere purpose of the execution only regime - MiFID II maintains the general classification of UCITS as non-complex instruments but it introduces the exception of structured UCITS which will now be treated as complex instruments for the purposes of the execution-only regime. The objective is to ensure that investment firms will be obliged to request information on their clients knowledge and experience, in order to assess the appropriateness of these instruments for them. H. MIFID II and relation with other pieces of financial regulation, choice of legal instruments 20. How does the revision of MiFID fit with other European legislation, such as the Market Abuse Directive, Over-the-Counter derivatives, short-selling, and Packaged Retail Investment Products (PRIPs) The revision of the Market Abuse Directive (MAD) and MiFID has been considered at the same time because together they guarantee the competitiveness, efficiency and integrity of EU financial markets. In order to ensure that they are fully coherent and support each others objectives and principles, they needed to be updated in tandem. Moreover, the pan-EU competition facilitated by MiFID has given rise to new challenges in terms of cross-border supervision, and maximum harmonisation of the rules and competent authorities powers in relation to offences are a necessary step. MiFID applies to the provision of investment services or activities by banks and investment firms in relation to financial instruments and to the operation of regulated markets. The objective is to support the development of a more integrated, competitive and efficient EU market in financial instruments with appropriate rules regarding conditions for authorisation as investment firms, organisational requirements to ensure they are managed appropriately, market transparency and investor protection. The Regulation on OTC derivatives, central counterparties and trade repositories (EMIR) on the one hand, and the Regulation on short-selling and credit default swaps on the other, have different objectives and therefore complement MiFID. The former aims to minimise counterparty credit risk and operational risk, while the latter increases harmonisation and transparency, and mitigates risks associated with short selling and the use of credit default swaps. Packaged retail investment products (PRIPs) are common products in the retail investment market, with broadly comparable functions for investors while taking a variety of legal forms. While offering benefits for investors, PRIPs are often complicated and opaque. In line with the Regulation to improve the quality of information that is provided to consumers ( MEMO14299 ), MiFID II addresses some of the problems identified in the PRIPs market by creating a robust and coherent framework in the areas of information about the product to clients and the rules governing the sales process for those PRIPs that are financial instruments or structured deposits, such as the conduct of business and the conflicts of interest requirements for intermediaries distributing these products. At the same time, the measures on product disclosure proposed in the PRIPs context complement the investor protection measures on investment advice and sales services regulated under MiFID. 21. Why are some elements of MiFID placed in a directive and others in a regulation Which parts will be in which instrument As in other pieces of EU financial services regulation, the split reflects the need to achieve a uniform set of rules in some areas, while allowing for national specificities in others. The De Larosire report highlighted that one of the problems leading to the crisis was an inconsistent implementation of financial services rules leading to a fragmented internal market. As a result, a Regulation (MiFIR) sets out requirements on: the disclosure of data on trading activity to the public and transaction data to regulators and supervisors the mandatory trading of derivatives on organised venues removing barriers between trading venues and providers of clearing services to ensure more competition, and specific supervisory actions regarding financial instruments and positions in derivatives. Such a harmonised approach will help avoid confusion in the daily functioning of markets, and minimise opportunities for harmful regulatory arbitrage between Member States. The Directive (MiFID) amends existing provisions on authorisation and organisational requirements for providers of investment services, and all rules regarding investor protection, including for firms located in third countries but actively engaged in EU markets. Also, the Directive specifies requirements in relation to the authorisation and organisational rules applicable to different types of trading venues, providers of market data and other reporting services, as well as the complete powers to be granted by Member States to national competent authorities, including the framework of sanctions for breaches of the rules. These provisions are best situated in a Directive to account for differences in national markets and legal structures as well as the profile of local investors. I. MIFID and international issues 22. How is the treatment of firms and market operators from outside the EU being considered The access of third country firms to the EU markets was not harmonised under MiFID I. Each Member State could introduce its own third country regime, subject to the general principles of the EU Treaties and provided that national provisions did not result in treatment more favourable than that given to the EU firms. In order to overcome the existing fragmentation and to ensure a level playing field in the EU for third country firms, MiFID II introduces a harmonised third country equivalence regime for the access of third country investment firms to the EU when providing services to professional clients per se and eligible counterparties. The access will be preceded by an equivalence decision taken by the Commission. Third country firms for which a decision is adopted will be able to request to provide services in the EU, without having to establish a branch in a Member State. For three years after the equivalence decision is made, Member States are allowed to apply national rules for provision of services and activities by third country investment firms. Likewise, as long as an equivalence decision is not taken, thirdcountry firms will continue to operate in Member States according to national regimes but will not benefit from the EU passport (they will not be able to provide services to professional and eligible counterparties in the entire EU). The equivalence process for a specific third country is initiated by the Commission but Member States can indicate their interest that a specific jurisdiction(s) is subject to the equivalence assessment. The equivalence assessment is outcome based (not line-by-line) and it means that the Commission will be looking into whether the third-country regulatory (prudential and business conduct requirements) and supervisory framework achieves the same objectives as the EU legislation. The third-country framework needs to provide for an effective equivalent system for the recognition of investment firms authorised under third-country legal regimes. Once the Commission has adopted an equivalence decision with respect to a specific third-country and that ESMA has established cooperation arrangements with the competent authorities of that third-country, the operators from that third-country will simply have to submit an application with ESMA and once registered with ESMA they will freely provide services to professional clients per se and eligible counterparties. With respect to provision of services by third country firms to retail clients, Member States will continue to apply national rules. The Commission regrets that there is not a fully EU harmonised third-country regime for retail clients but understands that the specificities and the increased level of protection for retail clients may also justify why Member States wished to maintain their national regimes. However, where Member States have chosen to require that third-country firms intending to provide investment services to retail clients establish a branch in their territory, the Directive harmonises the requirements (core organisational and conduct of business rules) with which the branch of a third-country firm will have to comply in order to be authorised by the competent authority of a Member State, but that branch will not have the right to provide services to retail clients in other Member States. In this sense, by third-country firms should see this as a positive step forward as it reduces divergences across EU Member States and therefore the legal and regulatory costs for third-country operators. In addition, MiFID II will not apply when investment services are provided at the exclusive initiative of EU clients. This exemption will apply only to the service or activity initiated by the client. An initiative by the client shall not entitle the thirdcountry firms to market new categories of investment products or services to that client and still benefit from the above exemption. 23. How does MiFID II compare to what other jurisdictions in the world are doing, in particular the United States MIFID II is the legislation through which the EU has implemented a number measures to meet our G20 commitments, in particular in relation to derivatives and is in line with the principles of regulation established by the International Organisation of Securities Commissions (IOSCO). This helps ensure convergence with other jurisdictions, including the US, Australia, Asia, and South America. Other jurisdictions are at different stages in the process of implementation, with some further advanced than others. Many provisions of MiFID II reflect core precepts in the regulation of securities markets globally. However, different jurisdictions have rules specific to their own markets. Assessments of comparability, as is the case under equivalence assessments for third-country recognition, should not be made on a line-by-line basis but rather look at the totality of the relevant legislation in terms of achieving the relevant objectives. As regards the US, MiFID II covers areas addressed by various pieces of US financial markets regulation such as the Securities Exchange Act and the Commodity Exchange Act. Like the Dodd-Frank Act, which amends these texts, the review of MiFID both amends provisions already in force and adds measures in light of the financial crisis and other market developments. The US and EU approaches and legislation are very much aligned in terms of achieving the same objectives. For example, the revised MiFID complements the regulation on OTC derivatives, central counterparties and trade repositories (EMIR). For more information: The MiFID regulatory framework consists of a framework Directive (Directive 200439EC), an Implementing Directive (Directive 200673EC) and an Implementing Regulation (Regulation No 12872006)School of Computing and Communications homepage Our Undergraduate degree courses are designed to challenge and inspire you, opening your eyes to the possibilities that new communication technologies make available. Sekolah ini adalah pusat keunggulan yang terkenal di dunia yang menawarkan berbagai kursus pengajaran dan penelitian di tingkat Master serta pelatihan PhD. Kami berkomitmen untuk melakukan penelitian kelas dunia dengan dampak tinggi. Kami terlibat erat dengan industri mutakhir, dan aktif dalam mengembangkan agenda penelitian baru. The School works with businesses for collaborative research, supporting student projects, placements, part-time and full-time work, training and guest lectures. During my final year of university when I was recruiting for finance jobs, I never put much thought into prop trading . But then one day I saw an interview slot listing for a mysterious proprietary trading firm and immediately asked my trader friend across the hall whether I should apply. Dude, he said, You can make hella money if you do prop trading. People make millions of dollars right out of school. You should go interview with them they love technical and engineering majors too Lured by the dollar signs, I went through multiple rounds of interviews and ended up winning an offer at a well-known prop trading firm but then turned it down to do investment banking instead. Which may have been a huge mistake. In this new interview with a prop trader, youll learn exactly why I might have blundered back then as well as: How to network and break into prop trading . What to expect in interviews and how similar they are to SampT interviews at banks. What you do as a prop trader, and what your average day is like. How much money youll make . and whether or not there are any exit opportunities. Lets get started: Q: Lets start with your story and how you broke into prop trading how did it all begin A: I didnt follow the typical finance track because I was an engineer in university, went through academic research, and then did a few corporate internships. I didnt feel like I would make much of a difference working at huge companies, so I got more interested in finance and started looking at firms that would hire students with technical backgrounds. Since my school was close to Chicago and since the economy was much better back when I was recruiting, plenty of companies came to campus to recruit engineers for all types of positions. I interviewed with 3 different prop trading firms on campus, and won an offer despite having less of a finance background than the other candidates and a lower GPA (around 3.0) I convinced them that I wanted to work there more than anyone else, and in trading they sometimes value hunger over academic achievement. But it couldnt have been easy to work there if you didn8217t have much of a finance background how was it when you first started A: I actually struggled a lot at the start its a brutal environment at many prop trading firms and your experience depends 100 on what the head trader in your group is like. As a clerk (entry-level position at prop trading firms), you dont know what youre doing and youre completing tasks such as reconciling trades so you dont exactly get much guidance or exposure right when you start out. After a while, I started performing better and was promoted to a junior trader after 8 months there. That can be on the low side for promotion to real trader status, but it depends on the size of the firm and your performance. Q: Well circle back to what you do on the job in a bit, but what happened after you were promoted to junior trader A: I spent about 18 months there working in Chicago, and then went to London to help restructure the trading group we had in place there. Then, less than year into that, I left to go join a colleague who had left our firm to start his own group at a small firm back in Chicago. We did well for a few years and hired a few people there, and then my colleague took off and I tried to start another group which didnt go too well due to the credit crisis affecting liquidity. Long story short, I ended up back at my original firm, and have been expanding into another new market since then. Q: So it sounds like youve bounced around quite a lot, though Im noticing one common theme here: Chicago. Are there not as many prop trading firms in New York and other places A: In the US, its definitely concentrated in Chicago. There are a few in New York, but its much more institutionalized there whereas Chicago is more about market-making . Most of the big prop trading firms are based in Chicago and are still doing really well despite the crisis, recession, and everything else that has happened. Breaking Into Prop Trading Q: So it sounds like one of the keys to breaking in is being near Chicago so you can network effectively. But besides location, what else can you do to get yourself noticed and land interviews with these firms Many of them are small, extremely secretive, and dont even do on-campus recruiting. A: Networking is your only option you need to speak with someone at the firm and have him pass along your resume. Get in contact with a trader there whatever it takes and pitch yourself to get on the firms radar. Some of the bigger firms in Chicago actually do recruit on campuses, but they tend to focus on top engineering schools and good Tier 2 schools with solid technical programs because they want mathscienceengineering people rather than the usual finance and accounting crowd. You run into more trouble with the really small firms groups of 8 10 people that might specialize in something very specific such as Eurodollar options. If theyre doing relatively well making, say, 10 million per year, they have little incentive to recruit aggressively unless theyre looking to expand into a new area or unless they really need extra help. Q: Right, but those are exactly the types of firms that many readers would target. Those firms release almost no information publicly, so how can you even find traders there if you want to cold-call or cold-email them A: Your best bet is LinkedIn even if the firm itself doesnt have a website or lists no information publicly, people will still list the company they work at on their LinkedIn profiles. So you could go through and search for prop trading or proprietary trading and see what results turn up. You could also go through exchange websites they list the clearing members and you can track down people there who dont even have an online presence. And then you could get even more creative and search for something like Trading LLC on Google in a certain geography, find the full name, and use that to look for more information and look up people who work there on LinkedIn Once you have the contacts, then its just a matter of following the usual advice here on cold calling and cold emailing. Just make sure you dont cold call traders during market hours You could also use informational interviews. weekend trips. and so on if you can find alumni from your school who are in prop trading. Q: And what should you expect in interviews Are they similar to trading interviews at banks where you have to pitch investment ideas, answer brain teaser questions, and so on A: Yes, the questions are similar to what you get in trading interviews. Generally, they ask more math questions and brain teasers in the first round because they use them as a screen to see who can perform under pressure, think on their feet, and reason their way into solutions. One really important point to make here is that getting these questions wrong is OK they care more about your thinking process than your answer . The worst thing to do is to freak out and apologize every 2 seconds or to second-guess yourself constantly. In the second round, youll still get brain teasers but they will also move into more behavioral questions: how do you cope with stressful situations What would you do if Random Disaster X happened A lot of it is figuring out what your instincts are like and how well they get along with you. As a trader, youre glued to all 8 of your monitors all day and you spend a lot of time hanging out with everyone else there. So not fitting in is even worse than not fitting in investment banking because you dont go to meetings or visit clients during the day. The most important points in interviews are to come off as confident, but not cocky . and to meet the minimum bar in terms of math and problem-solving abilities. Q: Earlier you mentioned that you convinced them that you wanted to work there more than anyone else and that played a big role in landing your offer at the firm how exactly did you do that A: As I mentioned, my undergraduate GPA was only around 3.0 on the low end of all the other candidates so although I interviewed well, I was waitlisted because other candidates still had better academic backgrounds. They promised to let me know in 2 weeks, but I wasnt satisfied with that response so I typed out a passionate email to the Partner I interviewed with and said that I would work for free and would do anything possible to get in. I even went as far as saying that I would clean the bathrooms and do menial tasks I would have done literally anything to win an offer. All the other applicants were much more reserved and didnt try anything like this, so I came across as honest and hungry, and that pushed me over the edge into winning an offer. With this type of strategy, the key is to prove that youre genuine you must show off a history of this kind of passion and demonstrate how you act this way in everything you do. A Day in the Life of a Prop Trader Q: Thats a great story, and it goes to show how effective it is to want the job more than anyone else. In the beginning I didnt bother to define prop trading because I assumed that everyone reading would be familiar with it, but lets take a step back and do that how would you describe it A: Sure. There are a couple different types of trading, but the basic categories are agency trading and proprietary (prop) trading . With agency trading, you execute orders for clients and take a commission on each trade. The challenge there is finding enough willing parties to properly buy and sell large blocks of securities. With prop trading . by contrast, youre the principal and you invest your own capital in whatever way you want, within the strategies youve chosen and your risk limits. Small prop trading firms cant compete with large banks when it comes to executing trade orders for clients because they dont have the same resources and networks at their disposal so they focus more on coming up with trading strategies and investing in areas where theres less competition. Many prop trading firms focus on market-making . which is a form of trading where the company acts as both the buyer and seller for a type of security and makes money on the bid-offer spread. For example, if an institutional investor wants to sell 200,000 shares of a stock at 10.00 per share but cant find anyone willing to buy that volume at that price, a market-maker might step forward and offer to buy the entire block at 10.00 per share even if they dont yet have a seller lined up. Then, they would aim to sell it for more than 10.00 per share to another investor whos looking to buy the same stock but cant find it in the volume hes looking for. So thats an example of what you might do at a prop trading firm, but the strategies used go way beyond that the line between trading at hedge funds, trading at banks, and trading at small prop trading firms starts to blur past a certain point. Also, note that most prop trading firms focus on fixed income and commodity derivatives rather than equities 8211 and if they do something equities-related, it8217s usually index derivatives . Q: Thanks for that example. I do want to return to the hedge funds vs. banks vs. prop trading firms point in a bit, but for now lets keep moving forward with what you do on the job. Whats your average day like Can you walk us through what happens from beginning to end, the hours worked, and so on A: It depends a lot on your position clerk vs. junior trader vs. Partner and also the firm type and geography. Ive worked at both the clerk and junior trader levels at both big and small firms, and in both Chicago and London, so Ill try to go through all of those without making it too confusing. As a clerk in Chicago, I would get in between 6:00 and 6:30 AM and would start off the day by reconciling trades from the overnight European shift. Then Id start producing position reports for all the traders showing exactly where their money went the day before and where it is right now. The trading day would start at around 7:20 AM for those in Fixed Income, and I would spend most of my days making sure that their positions were properly updated whenever they asked for more information or needed it to make another trade. At the end of the day, I would spend time reconciling all the trades from that day and making sure that we were set for the next day of trading. I usually left the office around 6 or 7 PM as a clerk. As a trader . I got in around 6:45 AM (sometimes a bit earlier), and the day would start with a morning meeting to go over overnight happenings. After that, you might go down to the trading floor itself if you work there, or you might go to your desk and start monitoring the markets and news, and to begin making trades. If youre working on the floor, youre busy making markets all day long (similar to the simplified example I described above), but you may also be talking to other traders on the floor or the rest of your team to get a pulse on the market and figure out whos making different trades. At the end of the day, everyone gets together to discuss the major trades that happened that day and who might have been behind them at a large prop trading firm you have good market insight because you get exposed to everyone from major institutional investors to smaller firms and individual investors. We might also talk about market-making overall, upcoming economic events and announcements, and so on. If youre senior a Partner at a prop trading firm you might leave at 3 or 4 PM in Chicago because the Fixed Income pits there close at 2 PM. As a junior trader . you might be there until more like 6 7 PM because you have to do more work and analysis after the market closes. Q: Awesome, thanks for that detailed description of both roles and the hours involved. What about your experience at the firms group in London Was it roughly the same hours and tasks there A: The hours were worse in London because we had to monitor both the European and American markets. So as a trader, I got in at around 6 AM and even earlier than that as a clerk and I would trade straight through until 6 PM to catch both markets. I usually left around 7:30 PM, so I was at work anywhere from 12 14 hours per day, with most of my time spent glued to my screen. Q: Sounds pretty brutal. I guess the message is, Try to avoid trading multiple markets, if possible, or you may develop a monitor tan after enough exposure. What about your experience at the smaller prop trading group you started with your colleague A: Since it was a smaller environment, the hours were much more variable. I could put in as many hours as I wanted depending on what I wanted to get out of it and what my goals were. When I first started, I woke up at 4:30 AM and got in by 5:00 AM every day to take advantage of a certain market we were getting into I would go to sleep, wake up again to trade markets at night for a few hours, and then go to sleep again and wake up really early once again. Small firms can sometimes be more flexible with your working arrangements, and Ive seen traders win permission to trade from home, take more vacation days, and take time off when they want. As long as you make a lot of money, they dont care too much about strictly monitoring you. At big firms, by contrast, many people only take 1 week of vacation time per year (outside of the major holidays), and your schedule is much more dependent on your seniority at the firm. Q: Very interesting to note. I dont think this work from home concept would ever fly at a bank or PE firm, but its great to take advantage of if you can get it. How else is life different at a small prop trading firm vs. a large one A: Its a much different environment in terms of personal risk . At a bigger firm, even if things dont go well in your group and your PampL doesn8217t look great or you lose money, you still make at least base salary and youll get some form of bonus. And if liquidity dries up or the spreads get too tight, you can always move to another group at the firm. So theres less risk and more security for you. You make much bigger trades as well, so the mentality is quite different a single trade there might actually move the markets, and you can gain more insight into why the markets might be mis-priced because your counterparties are often large hedge funds. Just as one example, when I worked at the large prop trading firm, I would know whenever Brevan Howard (a huge force in Fixed Income, options, and futures) was doing something. After a while, you start to recognize the size and style of trades a firm like that makes, which gives you more color on the market. At a smaller firm, you dont have that kind of insight so you must be more careful with the positions you take and the amount of leverage youre using. If the spreads move way out of line, for example, and you dont know why or you dont have enough capital, you might need to close out your positions. Prop Trading vs. Hedge Funds vs. Sales amp Trading Q: You just went over the differences between prop trading at small vs. large firms, but what about trading at prop trading firms vs. hedge funds vs. sales amp trading at bulge bracket banks Obviously the amount of capital under management is a lot different, but what about the trading strategies themselves and the markets you trade in A: Besides the capital under management, the biggest difference externally is the return on capital . At prop trading firms, you could easily get returns of over 100, and it might be more like 200 300 depending on the firm. But with a larger capital base its impossible to do that. If you had 20 billion under management, a 200 return would turn you into a 60 billion firm, and you couldnt replicate the same strategies year after year. You might see tens of millions or less invested in prop trading firms, and the much lower capital base explains why they can earn such high returns. The markets they trade in are also much smaller if a prop trading firm had 50 100 million invested in a specific product like natural gas options it might be the biggest market-maker (but not necessarily the biggest player ) in the space. Hedge funds . by contrast, tend to be much larger and focus more on directional trading (simply taking long or short positions and betting on the security8217s future price) rather than market-making. You could mirror some of the strategies a hedge fund uses at a prop trading firm, but generally the trading styles are quite different. With sales amp trading at banks . beyond the addition of agency trading, youre once again managing much larger amounts of capital and you tend to be more conservative with strategies and risk management. You invest in much bigger markets, so hypothetically you could keep growing and growing without needing to expand into different areas as a prop trading firm would. At a prop trading firm, if you got a 200 return in one year and therefore tripled your capital, you would have to re-deploy it (whatevers left after the traders have taken their cut) into different areas, push new products, and so on. Ive seen that happening more and more over the past 10 years many firms that used to focus just on equity options or fixed income options have been diversifying and getting into other markets such as grains, energy, and so on. Q: So it sounds like theyre different because of the capital under management, the strategies used (directional trading vs. market making vs. agency trading), and the markets they trade in. Would you recommend starting out in prop trading rather than at a bank or hedge fund What are the trade-offs A: Id say it depends on your risk tolerance and personality . If you go the prop trading route straight out of school, your exit opportunities are extremely limited and youre a bit screwed if you decide that its not for you. So I wouldnt recommend going into it unless you love trading, you dream of the markets, and you couldnt see yourself doing anything else. You can make a ton of money, but its not for everyone and some people find they dont like it. Its not even particularly easy to move from a prop trading firm to a hedge fund or bank because the styles of trading are so different. You would be overly specialized unless you happen to find a hedge fund that uses a very similar strategy. So if youre more uncertain of what you want to do, its better to start out at a large hedge fund, or even better yet, at a bank. Trading still gives you fewer exit opportunities at both of those as well, but at least youll have a brand name on your resume and you can move around to other industries more easily if you havent worked there for too long. Q: So Im guessing its not too common to move from a bank or hedge fund to a prop trading firm, either A: Traditionally, no, because the styles of trading are so different. But following the financial crisis and the increased regulation, more traders from banks have been coming over as banks have cut back on the prop trading business internally . Most of the time, though, theyve been more senior people with established track records as opposed to junior traders they went to the top-tier Chicago-based prop trading firms because they were offered lots of capital and the freedom to do what they wanted there. Q: Beyond just the differences in trading strategies, do you think any of that has to do with the cultural differences at banks vs. hedge funds vs. prop trading firms A: Thats a good point, but Im not sure you can draw any definitive conclusions there. Just like trading in other areas, the culture at prop trading firms is male-dominated with lots of yelling and stress all day long. Sometimes that convinces people who would otherwise be good traders to decide against doing it. You tend to see that type of culture at banks as well, though it varies by group, and its almost impossible to categorize the culture at hedge funds because each fund is different and it depends on the background of the people there and the strategies they use. Pay, Exit Opportunities, and More Q: Now lets turn to the question that everyones really curious about: how much you get paid in prop trading. Ive heard all sorts of stories, from people receiving decent base salaries at larger firms with bonuses based on your PampL to people receiving no or very low base salaries with pay 100 dependent on performance. What should you expect, and how does it change as you move up A: Unfortunately, theres no quick and easy answer to this one. Heres what I can tell you about the pay at different levels: At Chicago-based firms at the lower levels (clerks), the pay is very discretionary and youll likely earn a small salary in a tight range based on how good you are. Ballpark, maybe around the same as the base salary that an investment banking analyst or sales amp trading analyst at a bank would earn somewhere in the 60-75K USD range. As a junior trader, its still discretionary and you dont get to negotiate a percentage of your PampL most of the time, so its random and very dependent on the generosity of the Partner in your group. At one of my firms, the Partner was notoriously bad with profit-sharing and always screwed over the junior people even if they made more than their fair share of money for him but another group had a very generous Partner that paid everyone well, even at the junior levels. I hesitate to give exact numbers for junior traders at prop trading firms because its so dependent on performance and your group, but here8217s what you might expect with good performance: Year 1: 75K Year 2: 100K Year 3: 200K (If you8217re a producer, much less if you8217re a body) Year 4: 350-400K (if you8217re a solid producer and your group does well, but highly variable) Past Year 4: It becomes very dependent on group performance and what you8217ve brought in personally. And it might be lower or higher than these figures depending on all the other factors above 8211 that8217s a very wide range, but unfortunately compensation data is difficult to find for prop trading firms. Despite rumors to the contrary, youre not going to make 1 million as a junior trader unless you8217re a star in a group that is outperforming. Q: So how often does a group do exceptionally well And what kind of numbers do you need for that to happen A: As a quick anecdote, I knew of a 1-person group (1 seasoned trader working with 1 clerk) that made 20 million one year. So in that case, the trader would have definitely pulled in a 7-figure payday. If you were in a bigger group and that group made close to 100 million, lets say 80 90 million . you might also earn that kind of money even if you were more junior. I wouldnt say this kind of performances happens often it8217s more common in bull markets and when liquidity is high. You dont see it as much post-crisis, though some groups do perform that well every year. Q: So you shouldnt hold your breath waiting for 7-figure bonuses as a junior trader what about when you become a Portfolio Manager or Partner How long does that take, and what type of pay can you expect A: At that level, your pay structure shifts and then you can negotiate a percentage of your PampL for your bonus. The timeframe to make Partner varies a lot, but you can do it extremely quickly (a few years) if you have the right numbers and you make enough money. Ive seen people do it with 3 years of experience sometimes a trader will leave, or the firm is expanding into a new product, and if youve done well enough they might place you in that role. Partners might receive 25 40 of their PampL for their bonuses. So if youve made 5 million at that level, you could easily get a 1 2 million bonus . This compensation may also be tiered . especially at smaller firms you might make a certain percentage on the first 500K or 1 million of profit, and then the percentage steps up in increments after that. Since youre trading much bigger positions at large prop trading firms, its easier to earn a high profit there but you also have to split it among more people in your group, so you dont necessarily make more as an individual. Also at larger firms, the pay for everyone outside the portfolio manager head trader is more discretionary and it8217s up to the PM to award amounts based on personal performances 8211 so you may not see the percentages quoted above. Q: So what might you expect at a smaller prop trading firm What are realistic numbers for a group thats doing relatively well A: A smaller group or firm thats doing well might have 10 traders total . with 6 guys on the floor and 4 on computers upstairs. They might make 10 million in a given year trading something specific like Eurodollar options, and then split the PampL between everyone there so the Partner(s) might earn million-dollar paydays, with the rest of the traders getting somewhere in the mid to high six-figures depending on their seniority and individual performances. At smaller firms you can sometimes extract better terms for your bonus and negotiate your way into receiving a higher percentage of your PampL. If you have a proven track record and strategy, smaller prop trading firms may fight over you and some may offer you better percentages or more capital to entice you into joining them. Q: Finally, I have to ask the elephant-in-the-room question here: weve been focusing on the P part of that PampL and assuming that you actually make money. What happens if you lose money does that just mean you get a 0 bonus Do you get fired due to poor performance A: It depends a lot on the size of the firm, how long youve been there, and your performance in past years. Generally you are safer at big prop trading firms if you have one bad year, especially if you have a solid track record from the previous years. At really small firms, you might not be so lucky unlike large banks where there8217s a tolerance for losing money at first, in prop trading its 100 about your performance. So the reality is that yes, if you lose money at a small prop trading firm, you have a high chance of being let go. In terms of bonuses, you should expect no bonus if you8217ve lost money . regardless of whether you8217re at a big or small firm. Q: So lets continue playing devils advocate and say that things dont work out for you in prop trading. What happens next You mentioned there arent good exit opportunities, but surely failed traders must go on to do something else, right A: A few options Ive seen people pursue: Some people joined the finance departments of big companies. A few went to the back office at large banks. Some have applied to MBA programs to switch careers. Some have become financial advisers or gone into something like private wealth management . Note that not all of these former co-workers failed at trading some of them just didnt like the work itself, couldnt fit in with the culture at the firm, or decided they wanted to do something else, and left voluntarily. If you get fired, its really tough to get hired at another firm. Most prop trading firms prefer to hire organically and recruit people right out of undergraduate with no work experience they only poach traders from other firms when those traders have been extremely successful. So that is a downside to prop trading, and one of the risks you need to consider. Q: Right. But since youve done quite well over the past few years, you wouldn8217t have to worry about any of that Im guessing youre planning to stay in prop trading for the foreseeable future A: Actually, Im also interested in switching careers at this stage. Although Ive done well in trading, I8217ve also gotten more interested in investing in entire businesses and learning how companies work as opposed to just trading options or commodities. That happened partially as a result of investing my own money and becoming more curious about business in the process. So right now, Im applying to top MBA programs and Im planning to use that to transition into more of a corporate finance role, whether in banking, PE, or something else closely related. Q: Interesting. I guess that just goes to show you that even if youve done well and enjoyed a particular industry, you may still switch to something completely different these days. Thanks again for taking the time out to chat, and good luck with those MBA applications A: No problem, it was my pleasure. This is a fantastic interview, but I8217m still left with a few unanswered questions: I will be graduating from a non-target school this fall with a degree in Economics and a 3.4-3.5 GPA. I have been profitably trading equity options (non-directional) for over one year. I would say I8217m not theoretically math inclined, but I8217m well versed in statistics. 1.) I still am unsure of which 8220trading path8221 would best fit me. Prop trading seems technologically focused and I have no experience in programming, which also seems to be a problem for BB banks too. How important is the degree (and logicproblem solving skills with it) and a proven track record compared to more advanced mathprogramming skills 2.) Would the 8220Econtrading combo8221 be viable in searching for a sales trading job Or are sales traders more reliant on 8220people skills8221 I feel like sales traders are an often overlooked opportunity. 1) I8217d say a proven track record is most important 2) Yes, this is useful though communication and sales skills are also very important for sales traders. You may also want to demonstrate your passion in the stock markets for such role Does the age factor affect prop amp hedge fund trading careers also What if someone is in their mid-30s (but has legitimate and unique reasons for this 8220delay8221) Yes it can. If you can demonstrate a track record then being in mid-30s shouldn8217t be too big of a problem. Hi, I have always wondered, why do good traders look for exit opportunities to work elsewhere while they can just quit their jobs and just trade from their home Since they have the experience on how to trade, can8217t they just take their own money and trade for themselves from their home instead of working for someone Because I have seen many people who don8217t even have a degree or work experience, but all they have is just a small capital and trade their own money while sitting at home, and they are making a pretty decent living out of it So by comparison to those professional traders in SampT or prop trading firms, I think those professional traders have a better chance doing that since they have the skills and experience, and yet I rarely see professional traders do that Why you just summed up my goal. develop skills in HSUG, make it into a prop shop, get fired and then do it solo Thanks again for great articles and replying to previous questions, finally i found a chicago based P. T firm which after a demo period. funded me with 150 k account and 60 of profits payout which i am trading remotely. if i continue consistency in profits in P. T account, can a u. s.a based company apply for a working visa for me as a prop trader ( i have track record of personal account ongooing track record of P. T with 150 k account ) Thanks for the great article. After reading it, i looked up a bunch of prop trading firms to see if they recruited at my school for potential internships. However, i also noticed a lot of the lesser well known shops have 8220training programs8221 that charge excessive fee8217s. Is there any legitimacy in these smaller firms How would i distinguish legitimate firms from scam You mean these smaller firms are charging you fees for training you Most firms offer training to their candidates for free so I8217m not quite sure if that8217s legitimate. couldn8217t help but comment, after trading prop successfully for over a decade (actually taking home high-sixlow-seven after exp, cuts, comm ever year. because that is what its all about. not gross) success is dependent on one thingproblem given you are trading material. a mix of, but not limited to: math, risk, endurance, stomach, insomniac (granted you dont have a night clerk yet) amp constantly learningimproving from mistakes given you have the givens. its not what company you work for, its not who the head trader is, or speed of the network, or marginsfirepower of the firm etc. etc..These are just stepping stones the majority of aspiring youths concern themselves w as obstacles (ie. excuses). the problem is8230 go pick up a mirror. thats the problem. im being completely serious, how bad do you really want it if) you can8217t get into a top tier prop company as a trader. go clerk nights for them or a lessor if) you cant learn from a senior trader, go find another. if) you payout is too low, go find somewhere else that will pay you for the fair industry rates if) you cant make enough money in markets, go find another strategy than can (no matter what the cost: hours amp hours of charting, excel, backtesting, etc. etc) senior trading (non-institutionalor partner money) is unlike almost ever corporate profession. you eat Exactly what you kill after expenses. NO salaries, there never should be outside of clerking amp support infrastructure. This is how the 8220really8221 big money is made. this is how the sharks feed. if you cant 8230. go find a way you can8230 (this applies to whatever stage you are in you trading career) if 10 mil amp a thailand beach is what you seek than8230 just getting a job at a prop firm is meaningless by itself. extreme success in trading depends on the individual amp nothing else, winners always find a way. how successful or worthless you are in the electronic futures dream machine is your own decision. period, paragraph, happily ever after. i have a successful track record of turning my own trading account from 10k to 18k during 3 months with near 400 trades (and it is ongoing).i am a trend follower in cme futures in intraday and i have a rigid plan for my account. after being 3 years in loss now i can say i am a consistent in profits(2 months in paper trading and 3 months in live trading).the reason is that i have clear exit plan and more important i have controlled my ego and trading psychology and have positive expectancy system with proper reward risk ratio amp proper money management. ps i have BS of software and programming skill in Java that i think it has nothing to do with trading. as i read at least 6 months of tack record is needed for prop trading, if i can continue it to another 3 months and then with a 6 month track record is there any chance to trade on a firm account as low as 100 k. (p. s i live in iran ) is there any global PPT that accepts remote taders or is there any PPT in near country like dubai. any recommendation is appreciated. Potentially I think you could, yes, but it depends on the region you8217re in8230 I8217m not familiar with the environment in Iran. There are plenty of firms where you could probably trade remotely, but your best bet is to find places in a financial center like Dubai and network in-person there first. Thanks for the inspiring questions and answers above. I am a recent master graduate in Physics, targeting on hedge funds and prop shops in Hong Kong. Last year, I got the first round tel interview from Jane StXXXt. As you said, they asked me mostly maths and stats questions. I think I could marginally answer most questions, but I didn8217t successfully proceed to the next round. Since you said 8220getting these questions wrong is OK they care more about your thinking process than your answer8221. What exactly is the thinking process most prop shops are looking for Basically Physics, and many other, students receive little training on statistics and other topics, like brain teasers, which could be asked in the interviews. How the successful applicants prepare themselves for their applications and around how much time they have invested Moreover, will it be very strange if I offer to work for free at the early stage of my application What can I do if I failed at the first few rounds of the interviews Thanks for your insightful ideas. Well, there8217s a thin line between getting questions 8220wrong8221 and having the wrong thinking process. Basically they want to see that you can break down problems logically, ask questions when you don8217t know the answer, and use your reasoning to ask them for hints8230 but it also depends on the specific questions. The best way to prepare yourself is to get a book on brainteasers and practice from there: amzn. tovbKo3L Working for free can work, but I would only use that if you have no other good options. What are your thoughts on prop firms that require a risk deposit (guaranteed), an upfront fee for training and access to software, programs, etc and compensate on a profit-sharing base Seems I can8217t get a straight answer anywhere else since all think it8217s a scam idea. Thanks in advance From what you said, I don8217t think you need to do much 8220selling8221 because your experience already sounds impressive. The main thing is to focus on explaining how all of that translates over to the somewhat different strategies of larger places (talk about how the required skill set is the same, even if the specifics are different). For prop trading, do they only value math and engineering degrees, or would it be possible to break in with just a finance degree, as long as I could demonstrate good quantitative skills and an interest in financial markets In addition, I8217ll be coming from a non-target (USC) nowhere near Chicago. Is this too much of a long shot My next question would be, how exactly can I demonstrate good quantitative skills Unfortunately I won8217t be able to take any more math classes beyond basic calculus due to time constraints in graduating. I have the drive and passion to learn more math on my own, but proving this to firms is a whole other issue. You can get in with other degrees, but more technical ones definitely help. USC would be tough because of the lack of prop shops there, so you would probably have to travel. Quantitative skills: do a self-study course, start trading on your own, read books, develop your own strategies based on stats numbers. I am a computer programmer with a MS in computer science and Ph. D in Civil Engineering. Currently I am working for a bank doing IT work. I have a passion studying the trading strategy. I have spent more than fifteen years to develop an algorithm to trade equity. It has more than 20 annual compound return with less than 10 maximum draw down. I also trade this strategy with my own money. I am wondering If I have a chance to get into a prop trading firm If so, do you think if it is possible to work from home since I do not live in Chicago nor in NY City. You can trade on your own. Re working for firms at home, I think it depends on the firm and your arrangement with the firm 8211 hard to say. I currently work in the back office for a large hedge fund administrator, I have experience with multiple top tier clients (GS, Brevan Howard, JPM). But, I have always been passionate about trading. Unfortunately, I graduated in 2008 at the height of the recession and any job was tough to come by. I graduae from a state school with a finance degree and a cumulative GPA of 3.68. Do you think the barrier to enter the prop trading field would be too difficult coming from a back office role No, as long as you are really good at trading and can demonstrate your passion in the field. Do you trade any mock portfolios etc Can you network with HF managers and ask one of them to mentor you Perhaps you can even suggest them ideas If you do the above I think you can get in. It will just be a matter of time. Hi, I have a question very specific to my personal situation. Im a freshmen attending Hampshire College. (A pretty good college, but to be honest I messed up the first few years of high school so my cumulative GPA wasnt great) Would you recommend going to an ivy league business school to get an MBA directly after graduating from Hampshire College if I want to become a prop trader, or do you think Id be able to get a job as prop trader without a Top Tier university on my resume. Also note, on a 100,000 portfolio I started 4 months ago, Ive profited 40 (portfolio is now worth 140,000). Id really appreciate it if you could let me know if you thought an MBA from a top tier university would be beneficial before starting my job search, or if Hampshire College partnered with good networking skills and a history of making money in the stock market would be sufficient for my resume. Thanks Commodity trading firms have been in the news over the last couple months because of the massive profits they8217ve been making lately. Names like Vitol, Glencore, Cargill. Could anyone point me to any linksinfo about what working at one of these firms is like Basic info like day in the life of, different roles and functions, career paths, etc. would be great. I8217m assuming the highest paid workers at these firms are traders, but is it more about trading derivatives (futures, forwards, etc.) or arranging physical delivery of commodities (importexport)Maybe both Also, any input on career switching into one of these firms I8217m currently an associate at a boutique investment bank doing MampA work. While the work I do is completely unrelated, at least I have some finance experience. Not sure of those offhand, but we hope to cover more about commodity trading firms in the future. I can8217t reasonably answer your questions on the day in the life and pay right now. In terms of switching in, it8217s all about showing you love the markets, trading, and especially following commodities8230 if you8217ve done M038A you need to be able to answer why you went into that first rather than trading. And present lots of great ideas about how to trade commodities and ways to take advantage of trends in the markets. Hey, I wanted to know what is the basic knowledge you need to become a Prop Trader, I mean I8217m from India. I have done my graduation in Financial Markets(The Education system is pretty different here). I have been working for a broking firm since a year now. So I wanted to know if there are any specialised courses in Prop Trading As in, what do the recruiters look for in an employee Also, if you could tell me, what is the right age to get into Prop Trading, I mean what is prefered Thanks. I would also like to add that I8217m NOT trading right now, but I8217m very much interested. I am a Certified Financial Planner and I was in the wealth management department. But now I have been shifted into Debt Dept. So I don8217t have a knowledge of trading but I do know how to get the deals finalised, if that8217s of any use here. Terima kasih. VBA, Matlab, C, SQL etc are a plus but you really must be very goodproficient enough. But that must mostly applies to Algorithmic Traders, making high frequency trading models etc. But by quant skills I mean maths. Be able to calculate i. e. (random example) 0.10.05 8220at a blink of an eye8221. Plus knowing how to make bionomial trees, monte carlo simulations, filtered historical simulations (ok that8217s too much maybe) etc This type of skills and knowledge is highly appreciated. First part applies to roles where you8217d help with some IT prior to transitioning. In that sense it or valuable to have these skills. I8217ve seen VBA come up the most, SQL is the next most common and the third I8217d say is python. C languages and Matlab are really more for if you want to go down the tech or quant route. Though if the knowledge gives you an amazing strategy, I could see it working. The math skills you noted are more than you need. Unless your specific trading strategy revolves around them, I don8217t see how they8217d go beyond impressing people that you know math over you have the skills to trade. I was once invited in a first mathematical assessment centre at a top Prop Trading firm in Europe. The amount of questions you had to get correct regarding the very very tight time limit (80qs in 8mins, 50 at least must be correct) made it extremely difficult to get to the next stages. Plus if you answered incorrectly, there was negative grading. A guy I know also had once an interview with either a HF or Prop (don8217t know really) and they asked him during the interview to measure Pi using Monte Carlo simulation, something like that. So, generally, beware that without strong quant skills you have little chances to break in (at least in Europe). Oh, and one last detail the company stated explicitly that should you be unsuccessful in that test, you will never ever be considered in any future job applications to that company.. For the record, the company is Optiver, it8217s a dutch prop trading firm and started in 1987 if I recall correctly. They stated somewhere in their website that they have never had a single negative year in terms of profits so far. Personally, I think those people who pass these tests are generally weirdos with no soft skills. Yes, I8217m generalizing and that8217s because it8217s the easiest way to make a conversation. Yeah, I agree. One more thing (assumption) I would like to point out is that either the environment in prop shops can be very positive or demoralizing if you8217re not doing well. Middle ground must not be so common. What you must have in mind is that prop trading, in essence, is like someone who trades his own money in financial markets. HeShe just has so much capital that he needs someone else to assist himtrade on his behalf and with hisher money. I believe that this factor makes prop shops to have a much different work environment than being a trader at an IB or HF. Prop Trading at this day in age is definitely not institutionalized at all. Therefore you will find a wide variety of recruitment and interview tactics as well as a large range of business strategies. That plays to each persons advantage if they are dogmatic about finding the right opportunity but might not be fruitful for someone looking for a handout. I work for a prop firm in Sydney, and have heard about another prop firm here testing candidates by attaching heart rate monitors to candidates and asking them to perform mathematical calculations. 6 out of 15 applicants were eliminated on this test alone, the metric being able to answer questions quickly and accurately with a low hear rate. Now that8217s a high pressure interview. hey brian, hell of a question here. I8217ve got a close friend to whom was landed an ib internship at an elite boutique couple weeks ago, but he8217s just received an opportunity to start a recruiting process to a top BB, IBD position as well. He8217s from a target school, and he has great chances of getting this internship (he8217s from another country, where internships comprises 2 years period, doing it while having regular classes). If his medium term goals (2, 3 yrs) involve moving to an elite PE, should he quit from his current position, pissing off everyone in his current office or should he try the top firm spot (is there any chances of taking the rest of this conversation not publicly, by email) tks He should still interview and see if he lands the job. When he lands it, he can then figure out what to do. Ideally its best not to renege an offer but if he really clicks w the other team and they give him an offer, he should just be honest w the guys who gave him his first internship and renege the offer. If I8217m a self made millionaire, from a second tier university or first tier public university that never worked for a boutique firm, or bulge bracket firm, is that going to hurt or help my prospects during an interview, vs. the fresh ivy league graduate that is not a millionaire Would I be overqualified or disqualified due to not having the right pedigree People will probably ask why the hell you8217re going into finance if you are already worth that much. So you definitely don8217t want to say that. Just say you8217ve done well at XX but want to do finance because of YY. Not being from a top university and not having experience will make it very difficult to get in no matter how much money you have. If there is any truth to your claim, keep doing whatever you did to become a millionaire 8211 without knowing you the probability that you make more millions in trading is low. 8220Also, note that most prop trading firms focus on fixed income and commodity derivatives rather than equities and if they do something equities-related, its usually index derivatives.8221 Why Is it because equity trading is now easily done by robots Good question, not sure why exactly (anyone else feel free to contribute here). I think it8217s just the tradition that Chicago focuses on FICC and NY and other areas are more into other products, but take that with a grain of salt because I really don8217t know. Don8217t think it8217s completely about automation though. I8217m not sure what the precise reason, but here are my thoughts: They historically been market makers 8211 and making markets on large products (treasuries, short term interest rates, equity index derivs, commodities), specifically options on the future provided a large amount of liquidity and 8220edge.8221 In the past 10-20 years there hasn8217t been significant edge making markets in single name equities for the non-bank, non-specialist firm. They did make markets in equity options, but going to pennies sent that to the computers. That being said, there are many prop trading firms out there that are purely directional equity or futures traders. I don8217t have experience with them and they are a different animal, though what I do know is there are people that do very well there. In addition 8211 leverage. You get much more leverage if you are a smaller prop firm by trading derivatives rather than cash equities. Want an outstanding 200-300 ROE Good luck doing that with cash equities and surviving. Semoga bisa membantu. I personally don8217t work at prop trading firms, so I can speculate only, but would say an important factor might be the liquidity. This really relates more to fixed income and FX, which really are way larger (both cash-wise, and derivatives-wise) than any other market in the world. As very rough numbers, FX around mid-2010 had a daily volume of 4 trillion USD cash derivatives. The total global equity volumes (cash derivatives) would be around 60 trillion annually, so let8217s take any benefit of the doubt from me and say it8217s 100 trillion. All these were pulled from my memory where they ended up from BIS, so I am very happy for anyone to correct the figures. Anyway, assuming the above, you can see that FX market trades in notional volume in 25 days what the equity markets globally trade in 1 year. It8217s by no means as extreme for fixed income, but fixed income is still order or two in magnitude larger than equities. This is slightly reflected in futures 8212 the most liquid contracts in the world are the eurodollar futures on a short term USD interest rate called LIBOR. In these futures, and in plenty of others, CME is the world leader.
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