--- title: Loophole Lunacy description: Firms need to get to grips with the new and undulating market structure under MiFID II. image: https://articles.marketsmedia.com/hubfs/Imported_Blog_Media/market-particimifid-ii-delay-May-12-2022-08-55-23-91-AM.jpg --- ![websites-group](https://articles.marketsmedia.com/hubfs/raw_assets/public/MarketsMedia_August2021/images/new-MMG-01.svg) [![](https://articles.marketsmedia.com/hubfs/raw_assets/public/MarketsMedia_August2021/images/dropdown-new-marketsmedia-logo.svg)](https://www.marketsmedia.com/) [![](https://articles.marketsmedia.com/hubfs/raw_assets/public/MarketsMedia_August2021/images/dropdown-menu-traders-redlogo.svg)](https://www.tradersmagazine.com/) [![](https://articles.marketsmedia.com/hubfs/raw_assets/public/MarketsMedia_August2021/images/dropdown-menu-bestexe-logo.svg)](https://www.bestexecution.net/) [![](https://articles.marketsmedia.com/hubfs/raw_assets/public/MarketsMedia_August2021/images/dropdown-menu-fidesk-logo.svg)](https://www.fixglobal.com/) [![](https://articles.marketsmedia.com/hubfs/raw_assets/public/MarketsMedia_August2021/images/dropdown-fixglobal-new-logo.svg)](https://www.fixglobal.com/) - [*Facebook*](https://www.facebook.com/MarketsMedia/) - [*Twitter*](https://twitter.com/marketsmedia) - [*Linkedin*](https://www.linkedin.com/company/markets-media-llc) - [Newsletter](https://articles.marketsmedia.com/loophole-lunacy#popup-newsletter) #### Want the latest news on securities markets -- FREE? Sign up to receive exclusive articles on topics including: - Equity market structure - Profiles of buy-side investment firms - The evolution of multi-asset-class trading - Regulation and its implications for markets - The search for liquidity in fixed income markets - The convergence of fintech and capital markets Select one or more newsletters you would like to receive: menu [![Markerts media](https://articles.marketsmedia.com/hubfs/raw_assets/public/MarketsMedia_August2021/images/header%20logo.svg "Markerts media")](https://articles.marketsmedia.com/) - [Mifid Ii](https://articles.marketsmedia.com/tag/mifid-ii) - Mifid Ii - Loophole Lunacy Search - [Home](https://articles.marketsmedia.com/) - [Trending](https://articles.marketsmedia.com/tag/trending) - [Featured](https://articles.marketsmedia.com/tag/daily-email-feature) - [Sectors](https://articles.marketsmedia.com/tag/sectors) - [From The Markets](https://articles.marketsmedia.com/tag/from-the-markets) - [AWARDS](https://articles.marketsmedia.com/tag/events) - [Newsletter](https://awards.marketsmedia.com/newsletter-sign-up) - [Newsletter](https://articles.marketsmedia.com/loophole-lunacy#popup-newsletter) Hide search Search - NewsLetter ![](https://articles.marketsmedia.com/hubfs/Imported_Blog_Media/trading-up-occ-iex-select-board-members-citadel-lands-lieblich-573x379-Jul-07-2022-09-34-11-57-AM.jpg) [ON THE MOVE: Citi Hires Artie Ambrose;...](https://articles.marketsmedia.com/on-the-move-citi-hires-artie-ambrose-natalie-a-brown-to-mesirow) ![](https://articles.marketsmedia.com/hubfs/Imported_Blog_Media/Depositphotos_445735906_L.jpg) [Trading Adapts to ESG and Sustainable...](https://articles.marketsmedia.com/trading-adapts-to-esg-and-sustainable-investing) ![](https://articles.marketsmedia.com/hubfs/Imported_Blog_Media/iStock-917493152-Jul-07-2022-09-34-19-09-AM.jpg) [Focus on FX Execution Connectivity](https://articles.marketsmedia.com/focus-on-fx-execution-connectivity) ![](https://articles.marketsmedia.com/hubfs/Imported_Blog_Media/Depositphotos_333839538_L.jpg) [TRACE Turns 20](https://articles.marketsmedia.com/trace-turns-20) 11.14.2017 By Terry Flanagan Mifid Ii # Loophole Lunacy 11.14.2017 By Terry Flanagan ![Loophole Lunacy](https://articles.marketsmedia.com/hubfs/Imported_Blog_Media/market-particimifid-ii-delay-May-12-2022-08-55-23-91-AM.jpg) [Share](https://www.facebook.com/share.php?u=https://articles.marketsmedia.com/loophole-lunacy) [Tweet](https://twitter.com/intent/tweet?text=US+ETFs+Have+Record+Net+Inflows&url=https://articles.marketsmedia.com/loophole-lunacy) [Share](https://www.linkedin.com/cws/share?url=https://articles.marketsmedia.com/loophole-lunacy) *By Steve Grob, Fidessa* ![Steve Grob, Fidessa](https://articles.marketsmedia.com/hs-fs/hubfs/Imported_Blog_Media/Steve_Grob-May-12-2022-09-27-17-17-AM.jpg?width=158&height=158&name=Steve_Grob-May-12-2022-09-27-17-17-AM.jpg) Steve Grob, Fidessa According to the Collins English dictionary a loophole is defined as “a small mistake which allows people to do something that would otherwise be illegal”. The same dictionary offers an alternative American definition as “a means of evading or escaping an obligation”. Both these imply that anyone benefiting from such a loophole is either explicitly breaking the law or at least the spirit of it. Funny, then, that this week’s press has been littered with stories of how ESMA is frantically closing said loopholes as crunch time for MiFID II looms but a few weeks away. This isn’t just a question of semantics, however, but points to fundamental flaws in how the regulators have approached the whole task of improving on their previous masterwork, MiFID I. At the heart of the problem is the seemingly deep-rooted belief that trading on lit markets is somehow good whilst trading away from exchanges is inherently bad. If I can get a better price from a systematic internaliser in the size I want, then what actually is the problem either for me or my client? A second gross oversimplification made by regulators is that all markets work, or can be made to work, just like equities. To any market practitioner this is like saying nuclear energy is no different from solar panels, as they’re just different forms of power generation. So despite its huge size, and the enormous cost of compliance, I expect that we will see an endless series of loopholes being defined and closed as these facts eventually become apparent to the lawmakers. Interestingly, though, I did come across a third and far more literal definition of the word loophole – “a small hole in a fortified wall for shooting through”. This implies that the user of a loophole is neither good nor bad but simply taking advantage of their surroundings. I think this is where the real opportunity will lie as firms get to grips with the new and undulating market structure that unfolds. Sure, the execution landscape is going to get more complex, and yes, we will all have to be more transparent in how we navigate it, but the rewards will be there for those firms that have a clear plan and can execute on it. [Share](https://www.facebook.com/share.php?u=https://articles.marketsmedia.com/loophole-lunacy) [Tweet](https://twitter.com/intent/tweet?text=US+ETFs+Have+Record+Net+Inflows&url=https://articles.marketsmedia.com/loophole-lunacy) [Share](https://www.linkedin.com/cws/share?url=https://articles.marketsmedia.com/loophole-lunacy) ![email](https://articles.marketsmedia.com/hubfs/Markets%20Media/email.svg) ### NEWSLETTER SIGN UP And receive exclusive articles on securities markets ### Related articles 1. 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