Although rumours have been rife, Martin Merlin, a director in the European Commission’s financial markets confirmed that a delay was in the works for MiFID II. It was reported that he told a scrutiny session at the European Parliament that the preliminary view of the Commission was that the whole package’s implementation deadline should be pushed back by a year to July 2018.
In many ways, this is not surprising given that the legislation was one of the most ambitious and contentious reforms to be implemented. It not only extended the scope of the original MiFID I to cover bonds, derivatives and FX but also the infrastructure that oiled the wheels of trading, clearing and settlement. There had been protests from industry trade bodies such as the Wholesale Market Brokers Association, where chief executive Alex McDonald, was quoted as saying that the 2017 date would be “a real squeeze” to meet, and that he didn’t “see how that would be possible in the time allotted, if you were going to go for 2017”.
However, even regulators were not sure the original deadline could be met. The European Securities and Markets Authority (ESMA) had previously raised concerns with the European Commission that the technology requirements for MiFID II were too onerous and complex to be completed by regulators or market participants in time for the January 3, 2017 general compliance date.
One of the main problems has been the difficulty in putting meat on the bones of the law. ESMA has to draft technical implementing standards, which are then sent for review by the Commission, governments and the EU parliament. This is no easy task as these standards run to over a thousand pages, and their preparation has been fraught with difficulties. The challenges are not only down to their sheer number but also the significant technical work that is required to interpret some of the rules as well as the amount of leeway that has been left in the overarching law.
One rule that has proved particularly tricky is the EU’s transparency regime for non-equities. This has required ESMA to create a technique for measuring market liquidity virtually from scratch. Its chairman, Steven Maijoor, described the timeframe as “unfeasible” during the scrutiny session.
While market participants welcomed the news, the European Parliament is not that happy due to concerns over the additional time a delay could give the industry to amend any provisions in MiFID II that it does not like. However, an unwieldly implementation without the right systems and technology in place could be worse.
