MiFID II Delay – Not what you were banking on…

MiFID II Delay – Not what you were banking on…

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MiFID II Delay – Not what you were banking on…

by Bob Mudhar
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MiFID II Delay – Not what you were banking on…

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MiFID II continues to dominate discussions across the capital markets industry. The sheer volume of debate relating to the content and perceived meaning of the directive has only been exceeded by discussions about its effective date. After all the speculation, the EU Commission has now confirmed the extension of the deadline to January 3rd 2018. (http://europa.eu/rapid/press-release_IP-16-265_en.htm).

The MiFID II delay may give us a breathing space but it is inevitable. It is complicated, it is far reaching and it is a fundamental change in the way that the financial services industry in Europe is regulated. Organisations celebrating the delay are likely to be thinking about the elbow room this gives to:

  • Deliver the technology change programmes required for compliance;
  • Make structural business or process changes (to streamline operations or comply with other regulations) prior to starting on MiFID II compliance;
  • Continue to hope for the best.

Be warned! The extension to the effective date hides a sequence of implied dates that precede the official deadline by as much as three, six or even twelve months. Firms that hope to avoid the directive or those hoping to purchase and integrate a ready-made solution to achieve compliance are rolling the dice.

In broad terms, MiFID II trading obligations are to be split into two areas. The first relates to the requirement for investment firms and trading venues to report on activity. The second relates to the requirement for investment firms and trading venues to implement changes to alter behaviours after the effective date.

In order to publicise where firms execute client business, and to simplify organisational comparisons, it will be necessary for each firm to report on the five leading venues used to transact client business. Naturally this will require the capture, storage and reporting of transactions for the preceding twelve months. Although the reporting obligations only become effective on the 3rd January 2018 there are differing interpretations as to what the requirements actually mean. Several Citihub clients are working on the assumption that it will be necessary to report 2017 activities from the effective date, thus requiring the aggregation and storage of data from January 2017 and with a reporting process that works from the effective date (i.e. 2018 won’t be an extra year for design, testing and implementation).

In addition to this, it is Citihub’s view that early compliance could deliver competitive advantage in a market where transparency and the mitigation of potential compliance delays are increasingly valued by clients.

As we approach the end of the first quarter of 2016 we recommend that the development and testing of reporting solutions should commence as soon as possible.

Download our white paper on the latest MiFID II update.

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