Published: 31st January 2018

Of relevance to:  All Firms impacted by MiFID II

The Markets in Financial Instruments Directive II (2014/65/EU) (“MiFID II”) and the Markets in Financial Instruments Regulation (600/2014) (“MiFIR”) repealed and recast the first Markets in Financial Instruments Directive (2004/39/EC) (“MiFID I”) and were fully implemented in the UK at the beginning of this year.

The aim of MiFID II was clear:

  • to improve functioning of the financial markets following the financial crisis that occurred in 2008,
  • to provide greater transparency, and
  • to enhance investor protection and confidence in the markets overall.

The question everyone is asking themselves is: Has this actually been achieved?

Given we are only one month into the new MiFID II era, it is difficult to accurately assess the full impact that the new Directive and all the associated Regulations and Technical Standards have had on regulated firms and the markets, and whether the aims and objectives of MiFID II have actually been achieved.

What is clear from a brief look into some of the key areas is that out of every National Competent Authority (“NCA”), throughout the European Union, the FCA was one of, if not the only, regulator to have been ready and to have implemented MiFID II in full across all areas.

The majority of NCAs were still behind in implementing key areas – for example, looking at version five of the NCA Status Update sheet from UnaVista, almost all the NCAs, with the exception of the FCA, were still having issues with being able to receive transaction reports.

Firms have also had issues in implementing MiFID II; from the changes to best execution, record keeping, transaction and trade reporting, to actually getting to grips with embedding the new regime within their own systems, procedures and controls.

Although a number of firms may have been technically prepared for MiFID II in terms of having the required systems in place to meet the requirements (telephone recording, transaction reporting or assisted transaction reporting etc.), there was, in some cases, not enough time to adequately test these before the ‘go live’ date of 3 January and so, in many cases, firms are still on an acute learning curve, addressing and rectifying problems as they go.

There was an expectation that MiFID II would enter into force with some sort of fanfare or dramatic changes being brought about. Arguably, MiFID II entered with more of a squeak, with firms and NCAs alike trying to get to grips with one of the lengthiest and possibly most complex pieces of legislation and shake ups to financial services since MiFID I in 2007.

Where do we go from here?

Only time will tell how well MiFID II has been implemented and embedded within firms and by all the NCAs and whether or not the objectives have been achieved. It is perhaps too early to predict anything but, given the initial issues experienced, there are likely to be teething problems for some time to come with further issues down the line once the publication requirements for best execution come into force and once the data for Systematic Internalisers is published.

For the time being, if you would like an independent assessment of your own MiFID II compliance, feel free to get in touch with us  on +44 (0)20 7399 4980 and we’ll be happy to discuss your requirements.

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