ESMA lacks resources for MiFID II bond rules

ESMA lacks the ‘technological resources’ to deal with the influx of data following the implementation of MiFID II, as experts advise buy-side to “arm yourself with knowledge”.

The European Securities and Markets Authority (ESMA) lacks the resources to implement the MiFID II rules on bond trading, according to panellists at the Fixed Income Leaders Summit in Boston.

The panel discussed the effects of MiFID II on US markets and agreed ESMA simply does not have the resources or manpower to deal with the “influx of data”.

Mayra Rodriguez, compliance expert and magian principal at MRV Associates explained: “It’s a learning curve for the regulators, and they are learning they don’t have the technological resources to keep up with the market.”

Dialogue with the regulators is key, the panellists agreed.

Stephen Humenik, counsel at Covington and Burling, who has also formerly worked at the Securities and Exchange Commission (SEC) in the US, advised delegates to go to Brussels regularly and speak with the regulators.

He said: “Firms should go early and go often to speak with regulators in Europe if they want to change the course of implementation.”

Rodriguez advised delegates to “not rely on the sell-side”, but instead the buy-side need to “arm themselves with knowledge” on MiFID II.

Brett Chappell, head of fixed income trading at Nordea Investment Management, added “we now have a supranational agency dictating whether a bond is liquid”.

MiFID II is also set to further drive the electronification of fixed income as the need for a ‘digital footprint’ of each trade comes into effect.

Chappell pointed out pre- and post- trade rules and the mass of reporting requirements under the regulation will “drive more fixed income firms to go electronic”.