The European Commission is mulling over delaying the start of implementation of its Markets in Financial Instruments Directive, commonly known as MiFID II, by a year, till 2018. The new legislation has met with a lot of criticism from the financial services industry because of its sheer complexity.
Bankers and financial services providers, who will all be required to comply with MiFID II stipulations, have long been complaining that the most comprehensive piece of legislation for the European Union’s financial markets will be very difficult to implement. They now have cause for celebration, albeit a temporary one. However, other good news for the industry is that European lawmakers are considering some tweaks to the law to make it more usable.
Single Rule Book Too Complex
Basically, MiFID II aims to govern everything happening on financial markets, from derivatives trading and reporting to monitoring and preventing conflict of interests. In short, it was touted as a “single rule book” for these markets in the wake of the 2008 financial crisis.
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Yet it seems that in its efforts to cover every single thing that can go wrong in financial markets, the European Securities and Markets Authority (ESMA), the regulator in charge of the document, has swung to the extreme, by producing a way too complex set of requirements and compliance mechanisms.
Not Just an IT Issue
After yesterday’s news from an EC official that MiFID may be delayed by a year, Reuters cited ESMA’s Chairman Steven Maijoor as saying that the reason for the delay is technical: the service providers who will use this single rule book need more time to adapt their IT systems to the stipulations in the document. He noted, however, that only parts of the reform may need to be delayed.
Bloomberg, for its part, quoted EC spokesperson Vanessa Mock as confirming ESMA’s misgivings about the initial deadline, adding that the Commission will discuss the issue with the European Parliament and individual member states. In other words, it may be too soon for financial market players to celebrate, because the delay is by no means certain.
If the authorities decide on it, however, it will give banks and brokers a much needed respite. Brian Caplen, Editor of the Financial Times’ The Banker, wrote in the latest edition about the fact that there is simply too much documentation to absorb. According to him, the industry needs a break which could be used to gain a better understanding of everything that is being required of it, including any potentially adverse outcomes related to the implementations of all that Europe’s regulators and legislators have been brewing after the crisis.