MiFID II, the law which is said to transform markets, was delayed. As one of the most wide-ranging pieces of European financial legislation, MiFID II has proved challenging to implement. The law aims to reduce systemic risk, ensure transparency in the markets and bolster levels of investor protection.
The delay of the directive, which tackles a broad range of issues such as how derivatives can be traded to implementing measures to reduce volatility, is welcomed by an industry worried about the short time-frame in which to make all the necessary changes.
The law’s predecessor, MiFID I, took effect in 2007 and was mainly concerned with breaking down barriers to cross-border trading, focusing on equity markets. Initial intentions were for it to be revisited and for small improvements to be implemented. However, this changed following the financial crisis, when it was decided that far more ambitious changes were needed that would be part of a “single rule book” for financial services.
Approved by the EU parliament in 2014 with an implementation date set in January 2017, the directive lacks technical implementation details that make it impossible for some measures it contains to be put into operation. The responsible regulator, ESMA in this case, is developing technical implementing standards, but has signaled that it would need an extra year to finalise this work. These are to be reviewed by the European Commission, national governments and the EU parliament. The task, so far resulting in more than a thousand pages, has proved difficult for ESMA, which among others had to create a technique for measuring market liquidity from scratch.
Published in September, the last batch of implementing work didn’t pass scrutiny by the European Parliament. The Commission stated that a revision would delay the start date by as much as a year. Some lawmakers were arguing that only the difficult points should be delayed, with the rest of MiFID II to be implemented on the planned date.
The financial industry is said to be happy with the delay since MiFID II is expected to, among other fundamental changes, impose an EU-wide ban on independent financial advisers or discretionary portfolio managers accepting or retaining payments/inducements.
No wonder Philippe Lamberts, a Belgian Green Party member, when asked about the delay, said: "I am not from the financial industry, I am a legislator and I am not amused at all".
Read more: "Jeremy Woolfe: In Brussels, tomorrow never happens"