Analysis: Why MiFID II Keeps CFD Brokers Up at Night

The introduction of MiFID II regulations put industry participants in a tough spot as many were improperly prepared

One would think that the industry would have had enough time to prepare for MiFID, II given that the proposal was first heard in 2011 and consultations were available throughout this whole period, including Q&A documents offered by the European Securities and Markets Authority (ESMA). But as Finance Magnates has learned from its sources, Q4 was an intense period for brokers, as they waited for the application of the new rules in January 2018.

When we asked what the biggest obstacles and sources of stress for FX/CFD managers were, we found that there were actually several. Some of the most important issues described by us in the most recent QIR report by Finance Magnates Intelligence include reporting, dealing with external partners, and higher costs.

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Which aspects of MiFID II do you think will most hurt the industry?
Which aspects of MiFID II do you think will most hurt the industry?

On top of these many industry representatives shared with Finance Magnates their feelings before the introduction of MiFID II. While executives were obviously reluctant to reveal their position and weak points, the impression we received was far from optimistic. Many brokers have a completely different understandings of what they will be required to do and how they will be able to overcome the upcoming difficulties. Many of them are simply looking to each other for answers.

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Unclear Regulations

Despite the fact that the introduction of MiFID II was a process spanning several years, during which time there were many chances for consultation and preparation, not everything has worked out as intended. Industry participants feel that the communications of ESMA were not clear or detailed enough and did not leave them with a clear understanding of the new regulations.

So much regarding about what industry participants were worried before January 2018. New difficulties may appear for brokers in early 2018.

Did the industry find ways to apply the new rules according to intentions of the lawmakers? It remains to be seen how higher operational costs will shape the landscape and if it will push smaller firms out of the market. Understanding the industry’s position on MiFID II should be beneficial for all decision makers right now.

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