ESMA’s first Heisenberg moment

Anyone who has watched the cult TV series Breaking Bad knows that Heisenberg was the clandestine alias adopted by the show's chief protagonist, Walt White. The 'original' Heisenberg was, of course, the brilliant German theoretical physicist who developed his famous Uncertainty Principle. Simply stated it says that one can know either the position of a particle or its velocity but not both. Or, put more colloquially, the harder you try and measure something the less likely you are to be successful. I wonder, therefore, whether ESMA is facing its first MiFID II 'Heisenberg moment' as it realises the difficulty in calculating something as seemingly simple as the dark pool caps. These were due out yesterday and were supposed to tell us which stocks had breached arbitrary dark trading limits, but they are now delayed until March.

So, just one week in, we are starting to see that simply shipping truckloads of data from participants to regulators is no slam-dunk for greater transparency, safer markets or better trading outcomes.

It's not the fault of ESMA, however, but their political masters who have sought to dumb down financial markets into juicy sound-bites in order to show that they are being "firm but fair". But, in my view, the case for dark pool caps and their levels was never satisfactorily made. And, to make it worse, the data will be meaningless whilst the 2017 reporting regime overlaps with its completely different 2018 version.

The dark pool caps should have been easy, so I guess we can expect more uncertainty as we get into the real detail later in the year.