No second chance for MiFID II – FCA
UK markets watchdog the Financial Conduct Authority (FCA) has called on the industry to help regulators get MiFID II's technical standards "right first time" once the directive's text is finalised.
Speaking at a conference in London today, David Bailey, head of markets infrastructure and policy at the FCA, said the test for MiFID would occur when the European Securities and Markets Authority (ESMA) develop its level two rules.
"Under MiFID II we must develop technical standards that work across the relevant markets in Europe. Industry input including the provision of evidence-based analysis and thoughtful consultation responses will be crucial to help ESMA and national authorities achieve this," Bailey said.
Appearing alongside Samuel Robbins, the UK government's MiFID II policy head in his role as senior policy advisor to HM Treasury, Bailey said the FCA and Europe's other national regulators must structure MiFID's rules to avoid being over-prescriptive or necessitating subsequent changes once finalised.
"The FCA has a strong role within ESMA alongside the other national authorities that make up its membership. The process for the development of technical standards is thorough but, once adopted, any amendments would typically need to follow this full process," Bailey said.
"There is therefore a high premium on getting them right the first time and therefore active engagement by industry in the process is important."
The panel discussion at the Xtrakter conference, titled 'Transparency Challenges' also heard from Rob Ford, a portfolio manager for asset manager TwentyFour Asset Management and David Fellowes-Freeman from J.P. Morgan.
Although Bailey called for market participants to contribute to the MiFID reform process, the panel heard that buy-side firms were less well equipped to engage with regulators and therefore in a weaker position to comply with regulation in time.
The European Parliament agreed a version of MiFID late last year and when the Council finalises its position the trialogue will begin, whereby the two legislative bodies negotiate a final text with input from the Commission. This may take up to nine months, which means - depending on when the Council reach a MiFID II position - complete level one agreement will likely arrive in 2014.
Although council members are at odds on MiFID II's transparency requirements for trading venues, there is hope they could reach a final position as early as June. In its original MiFID II draft, the Commission abolished all waivers except for large in scale - which permits only larger trades to be executed off exchange. The Council remains in a deadlock on whether to include the reference price waiver which is currently widely used by dark pools to execute trades at the mid-point of the best quoted bid as sourced from a reliable reference market.