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Life After MiFID II?

Author: Elliot Parfitt

Published date: 2017/11

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As has been the case for much of this year for some firms (and a little of this year for others!), all eyes are firmly on January and the deadline for MiFID II. As you might expect with such a significant, complex and often opaque piece of regulation, levels of preparation and expectation vary widely across the industry.

In September, The Financial Times reported on an emerging gulf between US and European banks in their planned approach to the future of charging for economic research (one area of MiFID II looking to differentiate between paid-for analyst research and that which is rolled into trading commissions) however, it is interesting to note that the potential impact of Brexit does not seem to feature in the discussion around MiFID II – perhaps it is accepted that an increase in market transparency and a ‘safer, less OTC available market’ is a necessary process both as part of the EU and separately. Given the UK FCA’s significant contribution to the MiFID II programme and also in light of The City’s place in the global trading landscape, it is unrealistic to presume that Britain will reverse MiFID II post-Brexit.

The part of MiFID II which aims to drive trading away from the voice markets and onto electronic platforms will by necessity create enormous amounts of data for both operational and reporting purposes and throughout this year we have seen an uptick in firms (both buy-side, sell-side, venue and vendor) accepting the need for greater data storage capacity, data security and reporting ability.

Looking forward then, the consensus currently is that while there will, of course, be dramatic changes and ‘go-live / system on-line’ scenarios in the middle of the 1st trading week of 2018. MiFID II is so large, so complex and touches on so many areas of multiple global markets that there will certainly not be a ‘big-bang’ followed by peace and quiet. The bedding in period is expected to last for much of next year as systems are tested in live environments, regulators will be pushed on acceptability criteria and for clarification and above all, the world will continue trading. No doubt there will be fines, closures, appeals and opportunities all round as the post-MiFID II market matures. MiFID II is seen by some as being in conflict with the upcoming GDPR (with the former requiring calls relating to trades, even those not resulting in a transaction, to be stored for five years along with personal data of involved parties, and the latter requiring that personal information data not be stored for ‘any longer than is needed’) – the question being “Does MiFID II compliance provide sufficient need to hold personal information?”.

We will go into more detail around GDPR in future publications however, if you have thoughts or opinions on MiFID II please don’t hesitate to get in touch.