The MiFID II directive, due to be implemented by 2017, are causing some trouble in the capital market. The tedious process of regulative implementation is frustrating for the banks and brokers. It seems likely that neither regulators nor market participants will be ready in time, however nobody is willing to admit it. Will it end in another postponement game like EMIR?
By Christian Thygesen, managing partner | November 6, 2015
It is well-known, that the policy response to the financial crisis was a tsunami of new regulation. One of the more recent examples is the MiFID II directive, expected to take force in the beginning of 2017.
As was the case with EMIR, MiFID is a mixture of requirements to various policies, of reporting requirements, and of the processes for either trading or clearing various financial products.
Like for EMIR, market participants are frustrated by legislation which is complex, requires a combination of legal expertise, market understanding and at times even technical understanding to make sense of – and where processes for clarification of central technical standards can be agonizingly slow.
A game of Chicken
Finally, it seems that legislators and market participants have engaged in a game of chicken, where both sides know that the current deadlines are unfeasible. Regulators cannot get the technical definitions and the reporting platforms ready in time, and many banks and brokers are struggling to be ready by 2017, but neither party is willing to say it openly. The unfortunate consequence may very well be, that a postponement of at least parts of the legislation is quite likely, but will only be asked for – or announced – shortly before the deadline in early 2017.
One can only hope, that we will not see a repetition of the never (?) ending waiting game of EMIR-implementation, originally planned for late 2012, with the first parts coming into force in early 2014 and some parts still not enacted.
Although some marginal parts of these regulatory initiatives may bring value to the banks and other market participants, they largely see it as a painful cost, they would want to minimise and get over with as quickly as possible. And this is where we as consultants seem to have a role to play.
Get some peace of mind
Living up to regulation is a must. It is an unavoidable cost that you have to bear, if you wish to stay in the market and offer your customers the concerned services or products. But other than being a license to operate, it is seen as having no or very little value to the institutions concerned. Compliance, in particular when it comes to getting the demanded reporting up and running, is basically regarded as a highly specialized one-off exercise with little learning or other future value, and thus it is quite logic, that consultants are used for such tasks.
Currently, CMP is helping smaller and medium sized banks understand and prepare for MiFID II. In the first instance, we help evaluate, what is relevant for the banks concerned with the products they offer and the way they offer these products. We guide project managers by defining and prioritising their tasks, and if need be, we can also take responsibility for the project management and the actual technical implementation.
We believe we offer our clients value by combining our business and technical understanding to devise solutions, that allow market participants to be compliant in a low-cost fashion. But maybe the biggest value we offer our clients is peace of mind in an area rightfully perceived as unnecessarily complex.