Treasury and FSA have published the UK response to the Commission's MiFID Review consultation paper. In common with other respondents, the regulators stress that the changes the MiFID Review makes could be profound and the Commission must fully appreciate the impact. As a result, the UK found the consultation period too short. The response makes many significant points, including:

  • it is appropriate to assess whether and how the MiFID regime should be adapted and how it fits in with the international agenda;
  • the current arrangements for the treatment of third country providers work, and the UK does not support a regime that grants access only on strict equivalence assessment;
  • while the UK agrees the delineation of a new type of trading venue for mechanisms that have a significant overlap with Multilateral Trading Facilities (MTFs) it does not make sense to characterise "broad swathes" of OTC trading as taking place on an "organised trading facility" where the systems on which the trading takes place are not venue-like;
  • transparency in non-equity markets must not damage their liquidity;
  • in some markets, specifically commodity markets, there should be an assessment of the costs and benefits of transaction reporting as opposed to position reporting;
  • it would be a mistake to develop policy proposals to use financial market regulatory tools to systematically control commodity prices – another method should be used for ensuring commodity derivative markets provide robust and consistent price discovery mechanisms for the underlying commodities;
  • conduct rules must give customers better information and disincentivise biased investment advice;
  • the Commission has ignored or departed from the (then) CESR advice without explanation, which it should give;
  • although there is a need to investigate high-frequency trading and use of computer automated models, the Commission should not rush to introduce measures on the basis that high-frequency trading is harmful to markets; and
  • banning products of any kind must be done with great caution and there must be greater justifications for doing so than the Commission currently suggests.

(Source: UK response to the Commission Services' consultation on the Review of the Markets in Financial Instruments Directive (MiFID))