The European Commission (EC) has confirmed that new legislation to update MiFID, initially promised by Q1 2011, will now not be issued until Q2.
The consultation process that will inform the new proposals, which the EC was expected to conduct after its 2010 summer recess, will only begin at the end of this month.
The slippage was played down by an EC spokesperson who told theTRADEnews.com that the original timeframes were never “exact”. But some sources have suggested that the growing scope of the review has delayed delivery.
Under the terms of the original directive, the EC is obliged to carry out a review of MiFID before the end of 2012. This will be informed by a consultative process that includes technical advice issued in July by the Committee of European Securities Regulators (CESR), the body charged with harmonising securities regulation across Europe.
CESR, which carried out its own series of consultations, recommended a new regulatory regime for broker crossing networks and for regulatory intervention to create a consolidated tape of post-trade data.
A paper approved by the Committee on Economic and Monetary Affairs (ECON) of the European Parliament (EP) on 9 November recommended reclassification of broker crossing networks as multilateral trading facilities (MTFs) or systematic internalisers and called for size limits on executions in dark pools.
In addition to establishing the position of the EP on MiFID II, the paper will act as informal guidance for the EC's final consultation. “We think [the ECON paper] has helped to raise awareness among parliamentarians and investors prior to the start of this consultation,” noted the report's author, Kay Swinburne MEP.
The EC's review of MiFID is expected to consider the relationship between financial markets and the wider society at a more fundamental level than CESR's consultation, even reassessing “What are primary markets for, in the new world?” according to a source familiar with the process. It will take into account the views of academics and politicians in addition to market participants and rule makers, according to an EC spokesperson, who said, “It will not be at a technical level, as the review's recommendations will be proposed to the member states. It will be at a political level.” Once completed in Q2 2011, the resulting proposals will be put forward for the approval of the EP and European Council.
“The EC consultation covers the whole of the MiFID review, so it includes how fixed income fits in to the MiFID regime, how derivatives will be regulated, i.e. whether they will be traded on venues or not, and whether this will be on swap execution facilities or existing MTFs,” said Swinburne. “Commodities and short selling will be included as well.”
One knock-on effect from the slippage could be to reduce the effectiveness of the European Securities and Markets Authority (ESMA), which replaces CESR on 1 January. ESMA is intended to have greater powers than CESR to enforce regulation but some of these hinge on the MiFID review. In an interview with theTRADEnews.com Carlo Comporti, secretary general of CESR, said, “The first key new power that ESMA will be granted [under MiFID II] is that of adopting binding technical standards which national regulators must use to determine the proper implementation of MiFID. The second power is to ensure conformity at a national level with the European rules.”