So, the snappily named ‘Markets in Financial Instruments Directive’ has been applicable across the European Union since as long ago as November 2007. It’s basically a cornerstone of the EU’s regulation of financial markets. It does two things essentially:

  • It aims to improve the markets’ competitiveness by creating a single market for investment services and activities
  • It also aims to ensure a high degree of harmonized protection for investors in financial instruments.

All of MiFID, in summary, aimed to remove barriers to cross-border financial services within Europe for a safer, much more transparent and evenly balanced marketplace as a whole.  Then MiFID II came along…

MiFID II essentially extended transparency requirements

MiFID II was introduced just over a year ago, in January 2018 and was designed to offer even greater protection for investors and inject more transparency into all asset classes: from equities to fixed income, exchange traded funds and foreign exchange.

Its benefits for firms, if properly executed include:

  • Consolidating and gaining better insights into their data
  • Increasing transparency with regulatory reporting
  • Developing the untapped potential from the information being distributed

However it’s clearly a lot easier to say MiFID II than to actually implement it! The path to take-up is likely to be a long one and it has by no means been applied uniformly yet. The regulators are likely to have their work cut out now and for the foreseeable future. Amongst the reasons for the drawn out implementation is that, at 30,000 pages long, there are many complexities to MiFID II legislation.

Up to two thirds of financial companies are yet to fully comply

According to Finextra in TSAM Insights, the findings of a survey carried out in 2018, which included entries from 100 European capital markets, revealed:

  • 29% of companies experienced major challenges to carry out the best execution of MiFID II, while a staggering 65% admitted they lacked any system or method to ensure that trades were being conducted in compliance with MiFID II’s best execution standards

As we’ve said before, the headaches of successfully tackling MiFID II are not just for satisfying the appetites of the bureaucrats of this world, but are ultimately in the best interests of your firm’s customers. And this is the carrot side of the argument to encourage firms to take up MiFID II a little bit faster. However, the stick side of the argument, or regulator side, may ultimately be the bigger driver for financial services firms to comply – especially as the FCA (Financial Conduct Authority) is in an ever stronger position with better access to data, more data available and better analytics to assess financial organizations.

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