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Are You Ready for MiFID IIThe upcoming revision to the Markets in Financial Instruments Directive (MiFID II) in 2018 is set to alter post-trade activities for a range of financial market participants. However, with only months to go before the implementation of this directive, uncertainty on how MiFID II will impact the financial marketplace still exists.

Tony Freeman, DTCC Executive Director, Industry Relations, sat down with DTCC Connection to answer a few of the popular questions on the topic.

Q) Why is MiFID II being implemented?

MiFID I is 10 years old and was introduced to spur competition, increase transparency and harmonize trading rules in the European market, particularly for equities. MiFID II is an expansion of the scope of MiFID I outside of the equities market into fixed income and derivatives.

MiFID II has been referred to as the single biggest lift in the European Regulatory space and, in short, looks to fill various gaps that are perceived in the existing regulation.

Q) Is the implementation of MiFID II likely to be postponed?

No, MiFID II is set to go live on Wednesday, January 3, 2018. Given that there has been a one-year delay in implementation already, it is unlikely that it will be postponed any further.

Q) Will Brexit affect the implementation of MiFID II in the UK?

The U.K. will implement MiFID II in full and on time. All terms will likely be kept in force under a transitional arrangement for two to three years after Brexit (i.e. until 2022-23). At this point in time, we should not assume Brexit will make any difference to the implementation of MiFID II.

Q) My firm is based outside of the EU. Will MiFID II affect me?

European firms that are based within the EU will have to comply with MiFID II and this will, in turn, affect the clients and counterparties of these firms, even if they are based outside of the EU. For example, if you are a broker/dealer or custodian dealing with a European investment manager, then that transaction will likely be affected by MiFID II. Any firms that trade in the EU, or have a presence in the EU will fall under MiFID II requirements.

Q) Where will MiFID II most affect the post trade process?

MiFID II is primarily aimed at trading, but middle and back office segments will also experience a significant downstream impact. High impact areas will be Transaction Reporting, Entity Data Management and Unbundling of payments for Research.

Q) Will MiFID II mean that an LEI (legal entity identifier) will be required to trade?

MiFID II will introduce the concept of ‘no LEI, no trade’. From 2018, investment management firms subject to MiFID II transaction reporting obligations will need to have an LEI to execute and process a trade. MiFID II will require parties involved in all financial instrument transactions to include the entity’s LEI when reporting to the competent authority.

Q) Can I still trade with a lapsed LEI?

LEI’s need to be refreshed annually. Lapsed LEIs might be accepted by regulators in the short term but this approach should not be adopted in the long term as it is unsafe to assume that they will continue to tolerate this approach. To learn more about MiFID II and how DTCC can help to mitigate its impact, please visit