Long-awaited MiFID II Delegated Acts published


This MiFID II Delegated Directive brings clarity on some contentious investor protection issues, and confirms some key changes that firms need to accomplish in several important areas.

The progress of the Markets in Financial Instruments Directive II (MiFID II) has been slow, stuttering and at times unpredictable, and the complexity and scale of the regulation is at least partly to blame. Legislators and regulators are keenly aware that MiFID II will produce dramatic changes in the functioning of markets in Europe, so they haven’t shied away from taking extra time to make sure that the detailed technical components will address weaknesses without causing unintended consequences. Nevertheless, the extra time of one year (which is still being discussed by European legislators) may not even be enough if the next step of the MiFID II process, the release of the technical standards, doesn’t happen soon.

In headline terms, the industry is likely to welcome most of the changes introduced by the EC bearing in mind though that these changes are relatively limited. You can find our analysis of the details and the likely impact on firms in our briefing on the Delegated Directive.

Understandably, firms have been frustrated at the time it has taken to finalise these rules; after all, it’s difficult to get on with implementation without knowing exactly what’s required. But the publication of Delegated Acts means there’s no excuse for delaying implementation projects any further. It’s time for action.

Unfortunately, there are still some important ‘known unknowns’ for MiFID II. While the Delegated Directive brings clarity on investor protection, many of the important market-related issues, which will be covered by the technical standards, remain open. Until we get the regulatory technical standards confirmed, the crucial finer details of the transparency regime, for example, remain a mystery. However, overall, we now have clarity on the vast majority of the rules – so real progress can now be made.

The implementation deadline for MiFID II is being put back from January 2017 to at least January 2018, and it’s essential that firms use this extra time to think about the strategic impact of the legislation on their business. Specifically, firms should think about how different courses of action are likely to impact their future ability to serve clients and achieve sustainable revenue in the post-MiFID II world. This is about much more than just compliance with a new set of rules.

It’s also really important for firms to think about MiFID II in conjunction with other regulation affecting the sector, the new PRIIPS regulation being one of them. Firms that think carefully about the entire regulatory environment should ask themselves questions such as ‘How could my market abuse surveillance system be used to fulfil best execution requirements?’ and ‘What information do I need to make available to which clients and when, to meet all of my regulatory requirements?’ The firms that are able to address these questions in an integrated manner, while also factoring in the current technological disruption, will have the best chance of success in the MiFID II world.


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