Capco’s Regulatory Monitoring Newsletter
Posted: 1 August 2014 | Source: Capco
MiFID II/MiFIR – Final texts published
The final texts of the revised Markets in Financial Instruments Directive (“MiFID II”) were published in the Official Journal of the European Union on 12 June. These Level 1 texts are divided into a directive (MiFID II) and a directly applicable regulation (MiFIR). MiFID II will enter into force beginning of July 2014 and will be effective as of January 2017.
A number of aspects of MiFID II will be specified in the Level 2 related delegated and implementing acts, as well as technical standards. ESMA launched its Level 2 consultation process on 22 May 2014 with the publication of a Consultation Paper on ESMA's technical advice on MiFID II delegated acts (to be provided to the European Commission by December 2014). ESMA also published a Discussion Paper on draft RTS/ITS. Responses to the Paper will provide the basis for a further consultation paper to be issued in late 2014/early 2015. The Level 2 legislation texts are expected to be adopted by the European Commission by June 2015.
The Level 1 texts present a number of implementation challenges. For example, firms will be faced with a number of strategic decisions: What businesses will they undertake in the new regime? How should firms help clients with implementation? Systems implementation issues should not be underestimated either. Even for business lines already accustomed to the MiFID-regime (most notably equities) changes to market structure will have a significant impact on how firms interact with their clients. This will probably require a review—or replacement—of existing systems. These structural and operational challenges will have a knock-on effect on documentation and compliance procedures. The exact requirements may not be known until relatively late in the process, leaving little time to implement and comply.