The impact of the MIFID II on Exchange Traded Funds' European market

Abstract

The aim of this thesis is to study the effect that the entry into force of the new European regulation MiFID II and MiFIR had on Exchange Traded Funds. The implementation of post-trade transparency of the new directive that was imposed on most of the bonds present in the European market, decreased information asymmetry. This led to an increase of the liquidity of the bonds. The thesis starts exploiting first the Exchange Traded Funds Market describing the creation process of the ETFs and their characteristics. Secondly, it analyses if the new introduction of the MiFID II led to an increase of the bond ETFs’ volume. Lastly, it tries to understand what was the effect of the increased bonds’ liquidity on Exchange Trade Funds through an analysis of the correlation. The ETFs that were considered have as underlying assets only bonds that are domiciled in Europe. The examined period goes from January 3rd, 2018, the date of introduction of MiFID, to August 31st, 2018.