By Daniella Huggins, global marketing manager at Velocimetrics
As speculation solidifies into reality, it’s looking increasingly likely that MiFID II’s implementation date will be pushed back by a full year, extending the rather unrealistic 13-month compliance timeframe to a much more manageable 25 months.
MiFID II is a far-reaching regulation with an impact on multiple asset classes, business areas and trading industry participants of all different shapes and sizes. Anyone attempting to read it, even in bite-sized segments, would be recommended to do so armed with a decent caffeine supply. Its implementation, alongside the plethora of additional reforms currently facing European firms, will introduce significant change. For the managers tasked with making these things happen, considerable strategic and operational challenges lie ahead.
If the European Commission announces a delay, the industry’s collective sigh of relief will be clearly audible. Meeting the January 2017 deadline date with the information currently available presents real concerns. The latest regulatory technical standards were published in September, but leave a number of points with too wide a scope for interpretation, meaning the industry will need to wait for Level 3 Guidance for clarity. But that’s not expected until the New Year and this has left many firms feeling stuck between a rock and a hard place.
The regulation provides an outline and has, to an extent, left the industry to fill in the gaps in a number of areas. While firms need more detail before they can determine if the way in which they plan to meet the regulation will be right, they also face the requirement to act quickly. Being proactive is great, but if it is based on guesstimates because you don’t really know exactly what the final requirements will be, it can prove both unnecessarily expensive and time consuming.
The proposed delay to MiFID II will provide some much needed breathing space. It means firms can take a much more considered and planned approach to the regulation – hopefully with the direction they need to hand. Instead of implementing multiple point solutions as part of the need to act now, they’ll have time to consider the overall objectives of what the regulation is really trying to achieve, alongside the other compliance requirements cluttering their desks.
Firms can then determine if more holistic, end-to-end approaches that cohesively address multiple needs simultaneously could be deployed. This could include looking at how a firm could gain a much more detailed, real-time, understanding of what is happening to its trades from inception through to settlement. This would allow the firm to quickly spot emerging risks, such as errors or delays in the market data being used to formulate trading decisions, or the problem of a system starting to struggle as capacity rises. This insight could prove invaluable as firms seek to manage the multiple regulations that aim to control the market disruption risks that the growing complexity of trading technologies presents.
Being able to take a more cohesive approach often spares firms the challenges associated with integrating multiple point solutions down the line. A cohesive approach can also be much more cost effective as the firm can benefit from economies of scale and deliver business value over and above the compliance aspect.
We’ll have to wait and see what the outcome of the MiFID II delay being formally presented to the Commission is, but fingers crossed that postponement of the implementation date will be seen as more beneficial, and potentially risk adverse, than a rushed approach.