Although MiFID’s go-live date is only days away, some firms are waiting to see how the directive affects the market before spending more on technology, according to information technology services company Atos Origin.
Speaking on a conference call on Thursday, David Smith, a consultant at Atos Consulting, said firms had spent between 20% and 25% less on MiFID compliance than Atos had estimated earlier this year and last year.
"We are seeing a focus on bare minimum spend to become MiFID compliant," he said. "A number of our clients have really not wanted to spend a huge amount to develop infrastructure at this time."
One of the reasons for the wait-and-see approach, said Smith, was the sell-side's apparent lack of appetite for establishing themselves as systematic internalisers so far. Another was what he described as "regulatory disarray" about transaction reporting and the availability of end-to-end testing.
The third is that companies want to see how MiFID's best execution obligations will work in practice before committing resources. "Some firms are waiting to see if the liquidity situation that will develop because of best execution becomes a reality, and whether they actually need to spend more money on technology to achieve best execution," he says.
Despite this, Atos expects companies to start spending more money on MiFID eventually. Although companies' short-term focus is on MiFID compliance, in the longer term Atos believes they will concentrate on how they can gain a competitive edge in the new regulatory environment.
Jeremy Bryson, vice president, financial services at Atos Origin, drew a distinction between firms that will survive, thrive and fade away post-MiFID. "We believe that technology spend has been deferred, that it will occur, and the survivors, once they move to be organisations that thrive in this situation, will gain significant advantages around revenues and liquidity management," he said.
On the sell-side's reluctance to become systematic internalisers, Smith said, "As best execution unfolds as a commercial and a competitive factor we may see this investment increasing."