Nuit blanche to the bankers before MiFID II

by Huw Jones

LONDON (Reuters) – bankers will work all night to finalize the last details for the entry into force Wednesday of the european directive on markets in financial MiFID II implementation in the wake of the financial crisis of ten years ago.

This new regulation has already taken a year of delay due to its complexity, and the regulators have had to address recommendations in last minute to banks and financial intermediaries to avoid a deadlock of transactions and alleviate the concerns of those who are not yet ready.

“For the markets to deal with these process, there will be an intense activity that night,” said David Lawton of the consulting firm Alvarez & Marsal and former head of market regulation at the Financial Conduct Authority (FCA) of the uk.

The new directive fundamentally changing the rules concerning the operations on the different types of financial instruments in Europe, with the aim of improving the transparency and reduce costs to investors.

The banks will have to transmit more data to the supervisory authorities, and develop pricing systems more clear for their various products, rather than display prices that include in a single set their fees and their commissions.

Banks and securities firms have spent millions of euros to prepare for the big day. A report of Expand, a division of the Boston Consulting Group and IHS Markit, pointed out that the largest banks and asset managers will have spent $ 2.1 billion (1.74 billion euros) last year to comply with the new rules.

The transactions in shares, bonds, derivatives, commodities, and other assets must be declared, with a long series of data to monitor trade and identify the formation of speculative bubbles, in order to avoid a crisis like that of 2007-2009.

65 DATA IN 15 MINUTES

With the entry into force Wednesday of the MiFID II, fund managers and other market stakeholders will be required to fill out a form providing 65 pieces of information in the 15 minutes following the transaction, under penalty of a fine.

MiFID II will be a journey and not an event one-off, pointed to a uk regulator in response to questions about the conduct of transactions from 3 January.

So far, only 11 of the 28 members of the european Union have transposed the directive into national law. But the european securities and markets Authority (ESMA or ESMA) has noted that the companies could continue to operate even if their country has not completed the process of transposition of the european text.

France, Germany and the Uk are among the 11 member States which are ready, and the big banks should be, too. The stakeholders expect a thin market rather than paralyzed, in a context of extreme prudence.

MiFID II will improve the competition between different trading platforms and provides, in particular, to distinguish between the research award of the costs of enforcement.

One of the main objectives of Mifid II is to enable new platforms to come and compete with the historical markets, such as Chi-X, for example, for the shares.

“There’s going to be an interesting time in the next few years with the entry of new players on the market and use by the clients, such as banks, that new data is available in order to adapt their activities to the market,” said Giovanni Mazzocchi, Barclays (LON:BARC).

Mifid II is not a revolution for the stock market but it will have a big impact on the trading bond, commodity and derivative products, with a development of electronic transactions.

“For bonds and otc derivatives market, it is all a state of mind to change, a lot of transactions are still on the phone,” says Christian Voigt, senior regulatory at Fidessa, a provider of trading software.

(With Fanny Potkin, Juliette Rouillon for French service, edited by Véronique Tison)