EC admits MiFID II delay is ‘necessary’
The European Commission has acknowledged that further delay to MiFID II may be ‘necessary’, following a letter from ESMA which said it would not be possible to implement the legislation in time. The delay follows an earlier setback in May and means the new rules could be delayed until January 2018.
Pressure had been mounting on the Commission for some time to push back the deadline for implementation. Organisations including the Investment Association and the European Fund and Asset Management Association had called for the deadline to be delayed to allow more time for preparation. In September, MEP Kay Swinburne rejected that idea, saying it was premature. However, on Tuesday a spokesperson for the Commission confirmed that its preliminary view is that a delay “might be necessary” and added that the EC would meet with the European Parliament and member states before coming to a final decision.
“The renewed uncertainty over the timing of the MiFID II implementation is frustrating, but in reality does not come as a huge surprise,” said Uner Nabi, executive director, financial services risk at EY. “More than ever now, the industry need clarity around the level and nature of the delay. In the meantime, the approach of phasing implementation actions based on the level of certainty remains sensible, and firms will already be re-considering what their focus and next steps should be.”
Other commentators saw the delay as a welcome opportunity to allow more time for IT preparations.
“This latest development in the MiFID II saga certainly gives financial institutions more time to get their houses in order when it comes to reporting. This is likely to come as welcome news for the industry when you consider that more than 80 fields need to be reported on under MiFID II,” said Dev Bhudia, vice president of product management at GoldenSource. “While many are already on track from a reporting perspective, others will require additional time to adapt their processes and systems. The issue is not finding the attributes to report on, but also finding the linage and audit around the fields to prove what is being reported is validated.”
Bhudia added that the delay simply provides IT teams with more leeway to assess the highly complex changes that need to be made, such as the bond transparency rules, which force firms to categorically prove how they come to a price.
“Understanding this is easy, it’s doing it that’s the tricky bit,” he said. “The most basic approach to the problem, which many institutions have adopted, involves manually sifting through vast swarms of data. Not only is this a cost burden but it also introduces a high degree of risk due to the possibility of human error, which exacerbates rather than minimises the problem of inaccurate prices.
“The additional time will allow IT teams to look for a system that solves this problem by taking in the market data feed and commentary around a price, and then storing it ready for validation and audit at anytime. Crucially, due to the different interpretations of bond prices from various market data providers, any system an IT team deploys needs to be flexible enough to store liquidity and determine what level that price is at. This gives IT time to implement systems not only for Mifid II but more holistic solutions that can be leveraged across regulatory data silos.”