Thu, Feb 11, 2016

European Commission Announces MiFID II Extension

In a move to confirm what had already been widely anticipated, the European Commission has formally proposed to push back the implementation date of MiFID II by one year until 3 January 2018. This development will be widely appreciated by the investment community that is facing a number of challenges to put in place measures to address the operational systems required to deal with such matters as transaction reporting, transparency and high frequency trading.

The European Securities and Markets Authority (ESMA) is unsurprisingly concerned that with the huge number of financial instruments traded across a wide variety of venues, the required infrastructure simply would not be in place in time for the original deadline and there was a risk of market disruption as a result. Jonathan Hill, the Commissioner for Financial Services, Financial Stability and Capital Markets Union, reminded firms that “level II” implementing measures under MiFID II/MIFIR were still going to be adopted under the existing timeline and that these would be announced shortly.

What firms should do?

While this extension will come as a relief to many as they will have more time to prepare properly, firms should already be analyzing their business models to understand how the legislation will affect them and start setting realistic budgets and milestones for the changes. The "Level II" implementing measures have still not been finalized but this is expected to happen within the next couple of months and we will then have certainty about the whole legislative package.

In any event, the draft regulatory standards and technical advice produced by ESMA already provide enough information for firms to kick their MiFID II planning off in earnest. Firms should be aiming to get their systems and processes in place as soon as possible rather than delay their engagement. Moreover, firms should keep in mind the large volume of work required and the anticipated higher demands from the regulator given the extension.

How can Duff & Phelps help?

Duff & Phelps’ Compliance and Regulatory Consulting team has long experience of assisting firms with significant regulatory change and will once again be well positioned to assist you with:

  • Potential new obligations under MiFID II for firms, such as transaction reporting and phone recording, which are areas where they may be exempt under existing rules
  • Authorizations under the new regulatory regime for the trading venues, commodity firms and firms dealing in emissions, and provide regulatory experience as required relating to transparency
  • Authorizations and regulatory consultancy services specifically relating to processes and procedures around algorithmic and high frequency trading
  • Advising on best execution, dealing commission, client communications and the procedures around retail investor protection

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