Hello and welcome back to the Fides Weekly Update. Here are the key news stories of the week in your industry. As always, scroll down to find our regular feature of the Movers & Shakers of the week
1. MiFID II watch: A week in progress…
It’s been ten days since the Markets in Financial Instruments Directive (MiFID II) came into force, introducing a host of regulatory reforms that aim to inject transparency and investor protection across financial markets.
Although it hasn’t been a seamless process of implementation, critics argue there haven’t been as many bumps in the road as expected. That being said, we’ve been monitoring the news around the latest piece of regulation, and listed below all of the key developments to be recorded since the beginning of the New Year.
Last minute reprieves
Regulators kicked the first day of MiFID II with a last-minute reprieve granted to three clearing houses in the UK and Germany until July 2020.
Intercontinental Exchange (ICE), the London Metal Exchange (LME) and Deutsche Boerse’s Eurex Clearing arm will not have to comply with open access rules for exchange-traded derivatives, with the Financial Conduct Authority (FCA) explaining that the requests for waivers had been granted to ensure “orderly functioning of the trading venues.”
The open access rules under MiFID II are intended to provide investors with the option to trade and clear products at different exchanges.
The regulator has decided to agree on implementing a transitional agreement with the exchanges.
Dark pools still active
This week was supposed to introduce a hard hit to dark pools – private venues run by certain financial institutions where securities can be traded outside of public platforms.
These regulatory enforcements have been delayed, with the European Securities and Markets Authority (ESMA) claiming that it didn’t have sufficient data to work how best to introduce caps on dark pool trading.
Dark pools can present disadvantages for public investors as prices are hidden on dark pool trades until after completion, by which point the public investor is in a worse trading position.
In order to remedy this without prohibiting dark pools, which are important tools for institutional investors to carry out sizeable trades, regulators have decided to cap the total amount of trading that can take place per individual stock in a dark pool.
These volume caps are expected to be published in March this year.
ICE loses energy futures contracts
Commodity exchange ICE has announced it will shift 245 futures and options contracts in North American oil and natural gas liquids from ICE Futures Europe to ICE Futures U.S. next month.
It has been speculated the transfer is due to MiFID II requirements, and the FT reported some traders have closed positions on ICE and opened equivalent one on the Chicago Mercantile Exchange (CME), in an attempt to avoid the European regulation.
Boost in electronic trading and credit markets
Multi-dealer trading venue Tradeweb has reported a surge of investors trading on electronic platforms as they seek to comply with the more stringent regulatory requirements.
The Thomson Reuters majority-owned platform said European credit market volumes (i.e. corporate and financial bonds) surged 70 percent over the daily average in 2017 whilst the number of European interest rate swaps was up over 104 percent from the daily average volume.
Enrico Bruni, head of Europe and Asia business at Tradeweb, has said the platform has seen an increase in electronic trading of mandated products under MiFID II, which they believe is a likely to be investor attempts to meet new reporting requirements.
2. First law firms disclose gender pay gap
This week saw the first UK law firms publish data on their gender pay gaps ahead of the April deadline for gender pay reporting regulations in the UK.
Introduced last year, businesses with over 250 employees are required to provide information on four key measures to show any discrepancy between male and female pay, as well as an action plan as how to increase equality within their organisation.
Table 1: Hourly Rate
|Hourly Rate (Mean)
|Hourly Rate (Median)
|Herbert Smith Freehills
*The mean is the average difference in pay when the full earnings distribution of an organisation is taken into account. By identifying the wage of the middle earner, the median is the best representation of the ‘typical’ gender difference.
CMS was the first firm to report, showing a 17.3% pay gap in hourly rate. However, this jumped to 32.8% when the median figure was taken, showing a greater level of disparity between male and female pay. The data also showed a 26.9% gap in bonuses, with 90% of female UK staff receiving a bonus compared to 85% of male staff.
Herbert Smith Freehills also published their statistics, revealing a 19% pay gap in hourly earnings which grew to 38.8% when the median figure was taken. The data also revealed a 30% pay gap in bonuses, with 77% of women receiving a bonus compared to 71% of men.
However, Shoosmiths reported more encouraging results with a 15.4% average pay gap (below the UK average), with a median pay gap of 13%. An 18% pay gap was found in bonuses, with 94% of men receiving a bonus compared to 92% of women.
Table 2: Pay Quartiles
|Herbert Smith Freehills
*The proportion of men and women in each quarter of the employer’s payroll
The distribution of women and men within different types of roles in the firm, particularly in business support teams, and the high numbers of part-time female workers are reasons attributed to the gender pay gap in legal. All firms have a disproportionate amount of women in the lower and lower-middle pay quartiles, taking the female pay average down. For example, in accompanying data released by HSF, the mean pay gap at the firm would reduce to 8.8% if the analysis excluded the 22% of women who work in secretarial roles.
CMS and Shoosmiths also register a higher number of women in both the Top and Upper-Middle quartiles, although this is likely to do with an amendment to the legislation which means LLP members, or equity partners, are exempt from the analysis.
Table 3: Bonus Pay
|Women’s Bonus Pay (Mean)
|Women’s Bonus Pay (Median)
|Men who received bonuses
|Women who received bonuses
Whilst perhaps representative of the remuneration practices at law firms yet to be reported, any disparity in pay towards female workers is far from ideal. With the national median gender pay gap at 18.4%, law firms have some way to go to address the inequality in their organisations. Despite this, the gender pay reporting regulations serve as an important benchmark going forward for law firms to assess the effectiveness of their inclusion, retention and remuneration policies and reduce inequality in their organisations.
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Movers & Shakers of the week
Jose Maria Aznar, who was Prime Minister of Spain from 1996 to 2004 has stepped down from his position on DLA Piper’s global board, and is suggested to be joining former colleague Juan Picon at Latham Watkins, who acted as former senior partner and global co-chair for DLA.
Celeste Koeleveld is set to join the litigation and dispute resolution team in Clifford Chance’s New York office. She joins from the New York State department of financial services where she was previously general counsel and a member of the senior executive team
Energy partners Peter Wright and Rinku Bhadoria have both joined the London office of Squire Patton Boggs from Simmons & Simmons and King & Wood Mallesons, respectively.
Edward Smerdon has become the new head of legal and technical for Aon, after Sedgwick confirms it will cease operations this month
Office Openings & Closings