Following Mr Maijoor’s speech last week to the European Commission’s Economic and Monetary Affairs Committee during which Mr Maijoor touched upon the timeline for the implementation of MiFID II, ESMA has this week published a note [ESMA/2015/1514] on delaying the implementation of MiFID II. The note explains that it is unlikely that the Level 2 provisions will be published in the Official Journal before March 2016, which will leave less than nine months to develop the systems needed for MiFID II implementation, which is too short in the case of the most complex systems. ESMA states that it will not be feasible to have those systems ready for 3 January 2017.
ESMA refers to four areas where the complexity of the systems, their interaction and the need for a harmonised start date are especially acute, as follows:
- reference data – the publication of reference data is one of the cornerstones of the MiFID data system. The reference data list is the ‘census’ to which many other systems point or refer to, such that the absence of an instrument from the list, or the presence of wrong or incomplete information on it, will leave some obligations inapplicable;
- transaction reporting – the information on transaction reports submitted by investment firms to the competent authorities is the essential core data used for the market abuse surveillance purpose and it is therefore of the utmost importance to ensure a smooth, well-planned and co-ordinated transition process from the current reporting regime to the new one to assert there is no loss of visibility of ongoing market activity at any time;
- transparency parameters and publication – MiFID II encompasses a large increase in the number of instruments under pre- and post-trade transparency obligations, due to the extension in scope to ETFs, bonds and derivatives among others. MiFID II also foresees the establishment of a substantial number of thresholds. ESMA is planning to perform these functions centrally; and
- position reporting – this is a further new, data-heavy obligation imposed by MiFID II requiring trading venues, members and participants of trading venues and investment firms trading OTC in commodity derivatives to report positions on a daily basis, raising a number of implementation issues.
The note goes on to discuss three options for the consideration of national competent authorities (NCAs), ESMA, the Commission and the co-legislators and their pros and cons, namely a Level 1 fix, a Level 2 fix and a Level 3 fix.
A Level 1 fix postpones for a few months the application date of some articles. The Level 2 fix fixes the applicability date at a later moment than the applicability date of Level 1. A Level 3 fix consists of agreeing between all NCAs, and publishing at ESMA level, on an implementation date that would be later than the one contained in the relevant RTS/ITS.
ESMA's strong preference is for a Level 1 solution, which, according to ESMA, is the best option in terms of legal certainty and synchronicity and avoiding a legal vacuum (i.e. MiFID would be legally repealed but the new MiFID II regime would not yet be in force), albeit that it is not a precise tool and would require some Level 2 adjustments. ESMA conceded that it may also be politically harder to accept.
The note can be found at: http://www.esma.europa.eu/system/files/esma-2015-1514_note_on_mifid-mifir_implementation_delays.pdf