Following a whirlwind of negotiations among European Union (EU) law making bodies as well as market regulators, the EU institutions have decided to postpone the implementation of the rules on Markets in Financial Instruments Directive and Regulation (MiFID/R) until January 2018.
The decision, which is yet to be official, came as an outcome of an European Securities Market Authority (ESMA) and Commission request, and focused on the challenges of the development of IT systems. The areas that ESMA highlighted as particularly challenging include reference data, transaction reporting, transparency parameters and publication and position reporting. The Commission’s paper that summarized the solution underlined the pros and cons of different solutions and proposed to break implementation into two parts:
A. Market regulation and especially transparency requirements. On this part, the IT challenge impacts all key areas of MiFID/R, either directly or through further knock-on effects. A one year delay is being recommended.
B. Investor protection rule and with the exception is the rules on best execution, where the scope of the disclosure is designed by reference to a liquid market, there would not be a delay.
The de facto agreement suggests that implementation will start January 2018, but, the Commission will report regularly to the Parliament on the progress made with a clear roadmap on the implementation work and especially for setting up the IT-systems.
The EU bodies will offer more details on MiFID/R timeline in early 2016 whilst focusing also on implications between MiFID/R rules with other pieces of legislation such as Market Abuse (MAD/R), revision of the European Market Infrastructure Regulation (EMIR) as well as other initiatives around post trade.
MiFID II/R regulates trading and investment services in relation to shares, bonds, units in collective investment schemes and derivatives (collectively ‘financial instruments’) across the EU It regulates the trading of financial contracts and aims to bring more transparency to pre and post-trade space for all financial instruments thereby directly impacting broker dealers, asset managers as well as financial market infrastructures.
MiFID II/R will require investment firms to report executed financial instrument transactions across all asset classes to their national competent authorities. They will also be required to store and report the legal entity data underlying those transactions. MiFID II also includes requirements for firms to ensure the marketing of each financial instrument is tailored to the risk profile of each client. Checklists and approvals will need to be incorporated into specific client onboarding processes.
The Avox Enhanced Data Service comprises a series of modular based offerings designed to support client regulatory reporting requirements. Each module consists of supplementary data items identified as required content for the individual regulations. Existing modules include Dodd-Frank, FCA Transaction Reporting, EMIR, FATCA. Other modules under consideration include MiFID II/R.
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