Brussels has sent strong indications in recent days that one of its flagship pieces of regulation, the updated Markets in Financial Instruments Directive (MiFID II) could have its implementation delayed by at least a year.
While the revelations may come with little surprise from those in the industry, many of which have long complained the timetable was too short and too many issues were unresolved, these developments will have done little to calm one of financial market participants’ biggest concerns; uncertainty.
So with an official announcement on the issue expected soon, what can we expect to happen to this vast piece of regulation that touches virtually all aspects of financial markets?
According to JP Urrutia, general counsel, EMEA at agency broker ITG, we should expect the unexpected: “With so many issues still to be resolved, a delay to MiFID II was widely expected. However, what is really surprising is that we’re finding out things the industry thought were set in stone are still up for discussion.”
While he doesn’t expect that the level 1 text (the political agreement reached by the Commission, Council and Parliament) will be altered, Urrutia said the delay could lead to renewed lobbying and bargaining in Brussels that would not only see the grey areas of MiFID II clarified but could result in significant changes to some of its more controversial and difficult provisions.
But not everyone agrees. Anne Plested, regulation expert at technology firm Fidessa, believes the most likely outcome is a new timetable.
“The different factions certainly seem to be laying the groundwork for some sort of a delay to the MiFID II implementation deadline. It may be that some or all of it gets delayed, but the recognised aim of such a move would be to aid implementation timescales not to rework the rules,” she said.
Her colleague, Christian Voigt, senior regulatory adviser, went even further saying: “, it is not the European Securities and Markets Authority (ESMA) that can decide on a delay, but the European Commission. Even if Steven Maijoor, ESMA’s Chair, has concerns around the “unfeasible” MiFID II calendar, the EC might not agree.
“We had a similar situation in 2013 when ESMA asked for a delay to the EMIR transaction reporting rules. Back then, the EC declined to sanction any extension of the implementation deadlines. For it to succeed now, ESMA and the industry may need stronger arguments.”
It seems that the industry is going to suffer yet more uncertainty in the months ahead. Many experts believe that aspects of the regulation will be enacted slowly over the next few years to help firms and regulators deal with this major regulatory change.
“It’s likely the Parliament will look to get a phased approach to MiFID. However, until we’ve got official statements on what is happening firms should continue with their implementation work wherever possible,” Urrutia advised.
Plested agreed that the rumoured delay is no reason to sit back, explaining: “Given the widespread impact of MiFID II on all European investment firms and trading venues, requiring them to update their systems and review working practices, Fidessa’s MiFID II project approach remains steadfast; press on now, prioritising the changes where most detail is known.”
The next few weeks are also likely to feature a significant amount of finger pointing to assign blame for the delays to this flagship EU directive. MEP Markus Ferber has already publicly blamed ESMA for the delays, though Urrutia said that the root of the problem stem from the political process.
“Early on in MiFID II’s development there were already suggestions it was far too big and should be split up but, in the wake of the financial crisis, the policymakers’ unrestrained desire to undertake a headline grabbing ‘ambitious’ grand European project proved to be a temptation too difficult to resist. What we’re seeing now is as a result of it being much too broad in scope.”