Brexit and other European political factors will be the main driver of any European regulatory change in the near future, including any changes to MiFID II or the introduction of MiFID III, according to MEP Kay Swinburne.
Delivering a keynote address at the Fixed Income Leaders Summit, MiFID II author Swinburne highlighted the UK’s upcoming departure from the European Union in March next year as key influencing factor on how regulatory change may play out.
While Swinburne maintained that the introduction of MiFID III is a “reality”, this is more likely to be formed through a series of reviews to existing MiFID II standards and other technical amendments, primarily driven by political motivations.
“Even though I am a politician, I take no pleasure in bringing politics into financial legislation and I firmly believe that any review of any highly technical dossier, anything like MiFID II, should be kept at a distance from serious political influence,” said Swinburne. “But, I’m afraid it is a reflection of the reality that I have observed in Brussels over the last few months that it would be foolish to consider future regulatory change without considering the political drivers that are there right now.”
Citing Brexit as the “single biggest driver right now for MiFID III-type changes”, Swinburne said that the UK was “fairly guilty about not looking beyond other political developments” but underlined the importance of other fundamental changes occurring across Europe that will also play a significant role in how regulation is reviewed.
“We need to consider the upcoming changes that will take place in the EU and the EU’s own institutions,” Swinburne said, pointing to the upcoming European Parliament elections in May 2019, which in turn will place a greater emphasis on fringe political parties that traditionally “vote against legislation, regardless of its content.”
Addressing the possible timeline for when the industry could expect to see a review of MiFID II occurring, Swinburne said she would “write off the first six months after the European Parliament mandate”, instead highlighting a number of changes currently underway in Europe that will impact on regulatory changes, such as the SME performance review and post-trade transparency rules for the fixed income space.
“My concern now is that MiFID III will be shaped not by data resources, but by purely political objectives, and above all, it is going to be shaped very differently by the relationship going forwards between the UK and the EU, and that will override all the fundamentals of market analysis,” she said. “So, MiFID III, as it is known in that nomenclature, may be a long time coming. But changes are happening now.”