Has the financial services landscape already changed following MiFID II implementation?

By David Beach | 4 January 2018

With any and all significant legislation, the industry have voiced their opinions on MiFID II as the deadline came and went. The concerns, challenges and expectations from various industry leaders have been collated below.  

Yesterday, January 3, marked the seven year wait for the sequel legislation that builds upon the groundwork laid out by the Markets in Financial Instruments Directive 2004. The Directive’s core principles look to increase the transparency across the EU’s financial markets in light of the 2008 crisis, primarily focusing on Over-The-Counter transactions, as well as protecting EU citizen rights.

MiFID II, the revised version, looks to increase and extend those transparency requirements with near real-time reporting whilst also acting as a standardisation of regulation. It will have significant impact on High-Frequency-Trading as trade orders need to be posted for at least half a second, far longer than they currently are; evidently, this will have liquidity consequences.

As with all regulatory changes, the practicalities are yet to be ironed out. As you will see below, the FCA aren’t taking prisoners and it’s only a matter of time before fines are issued. Or is it? No doubt there will be leeway for smaller firms with less weight who will struggle to implement the necessary IT requirements. As the cliche goes, only time will tell, but if you’re impatient here’s a smattering of industry leaders offering their opinion on MiFID II.

What the Standards Bodies think: Tim Healy, Global Marketing and Communications Director, FIX Trading Community

“The regulators will be monitoring activity and looking to ensure compliance. What they will be keen to see are that best efforts taken by firms to adhere to the new regulation. They will be mindful that companies may initially make some errors. What they will be unlikely to tolerate for too long is a blatant disregard for the new regulation. This is here to stay and the FCA’s role will be to enforce ESMA’s legislation.

What will be interesting to see is the innovation and how companies adapt to the changes. Best Execution becomes a requirement rather than a theoretical aim and the unbundling of research and trading is expected to lead to changes in how the buy side value their research.

Of course, these are known unknowns as someone famously said. The coming days, weeks and months will provide more colour as firms position themselves appropriately and FIX Trading Community will be here to address any FIX related implementation issues that arise for our member firms now that the go-live date is here.”

What the FCA think: Mark Steward, Director of Enforcement and Market Oversight, Financial Conduct Authority

"Effective market oversight depends on accurate and timely reporting of transactions. The obligations under EMIR, as with MiFID, are key aspects of such oversight.

“It is vital that reporting firms ensure that their transaction reporting systems are tested and deemed fit for purpose, adequately resourced and perform properly. There needs to be a line in the sand. We will continue to take appropriate action against any firm that fails to meet requirements.”

What the banks think: Sophie Guibaud, VP of European Expansion at Fidor Bank

“MiFID II is a key piece of European-wide legislation.

“This regulation, along with the incoming GDPR piece of legislation, means that financial organisations will be looking at immediate options to help them decrease their regulatory risk and costs, while also improving the customer experience this year.

“The new regulations will have a huge effect as financial organisations’ relationships with regulators will rely upon real-time data to be shared to improve and speed up risk management and market stability, all through the power of APIs.”

What Investment advisory services think: Charles Owen, Founder of CoInvestor

"CoInvestor welcomes the standardisation in the alternative assets investment sector that has now arrived with MiFID II. We are fully aligned with financial advisers on this, who have the end investor front of mind. Getting the best for the advisers on our platform involves providing greater visibility and more easily comparable information, which a suite of new regulations now require, not just MiFID II, but also PRIIPS.

Historically alternative assets have been more opaque than other asset classes, but this is changing now that most fund managers are having to comply with these new regulations. The digitisation of alternative assets investing, with all that involves, has brought about greater transparency, the ability to have clear audit trails, and creates an ability to access all comparative data in one place, which will only serve to improve best execution for the end investor. While some smaller fund managers are still struggling to get everything in place, we can see things heading in the right direction.

MiFID II will be a process, and the 3rd January is the deadline but better standardisation won’t be something to be ticked and filed away. It will be a continual improvement in practices and we know that will benefit the end investor."

What technology service providers think: Stefan Negrila, Head of Regulation at Excelian, Luxoft Financial Services

“As expected, most institutions were only partially prepared for MiFID II. Therefore financial regulators have granted last minute exceptions to ease the pain and ensure orderly function of the markets. Futures exchanges in the UK and Germany were granted a 30 month extension by the FCA and BaFin respectively, for example.

“A lot of work still needs to be done. Even after the bulk of the compliance work is finished, firms need to adapt to the new reality. Those that are fully prepared have come out ahead and are already picking up trading volumes from competitors.

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