Seven years in the making, with a budget of over $2 Billion and running in compliance costs, the monster movie that is MiFID II is finally on general release!
Such is the history-making nature of this regulatory shift that some brokerage firms were still working into the small hours of yesterday, trying to figure out how to trade under the new rules and comply with a law whose scales are finely balanced between the perceptions of problem and opportunity.
Global In its effect – certainly in respect of overseas companies wanting to trade with/into Europe – MiFID II’s reforms are ambitious, aimed at strengthening investor protection and increasing transparency. However, at the time of writing, the script is not yet complete given that many areas of the new law and regulations remain opaque and greater understanding is needed before firms and their over-burdened compliance officers can fully get to grips with exactly what they have to achieve.
Even the FCA, as the competent UK regulatory authority, are unable to “give guidance on European guidance” and are consequently uncertain how best to put some of these elements into practice.
FCA will expect firms to demonstrate that they have made realistic efforts to implement the new rules. But they have also said that they realise that not everything can be put in place at once and will be flexible in their approach to supervision in this regard. In particular, they will be looking for feedback from the market on implementation issues.
An exception is in transaction reporting, where the new régime, including where necessary the legal entity identifiers (LEIs) for non-natural persons, has been changed from the originally intended date of today, 3 January, by ESMA. The FCA’s statement on 20th December explained;
“The temporary process outlined in ESMA’s statement for LEIs of legal persons will last for six months from 3 January 2018. As ESMA’s statement notes, this approach requires the FCA to temporarily amend a validation rule in our transaction reporting system, the Market Data Processor (MDP). We will do this as soon as possible, but that change will not be made by 3 January.”
Ian Cornwall, PIMFA’s Director of Regulation said: “The implementation date of 3rd January 2018 is a major milestone and firms have made considerable investment in terms of both time and money to meet the deadline. As the FCA recognises, the MiFID II project will continue in 2018 as the rules “bed down” and further information is released by the European supervisory body”
PIMFA will be continuing its MiFID II project to support firms during 2018.