Recent weeks have seen increasing numbers of market participants and trade bodies in the European Union (including the Investment Association and the European Fund and Asset Management Association) calling for the start date of Markets in Financial Instruments Directive (MiFID II) (and the associated Markets in Financial Instruments Regulation (MiFIR)) to be delayed by a year because of complexities in getting the detailed rules finalized and in getting the necessary information technology (IT) and transaction reporting infrastructure in place. It now appears that EU legislative bodies also may arrive at the same conclusion.
While the recast MiFID II and the associated regulation (MiFIR) were finalized on May 15, 2014—at which time January 3, 2017 was set as the date that the new rules were to come into effect, it was only on September 28, 2015 that the European Securities and Markets Authority (ESMA) published its recommendations for the detailed rules that financial firms will have to comply with (in the form of various regulatory technical standards (RTS) and implementing technical standards (ITS)). The RTS and ITS have still to be endorsed by the European Commission (it has a deadline of December 28, 2015 to do so) and they must then be transposed into national law in each of the 28 EU member states before they can be complied with by any financial firms—a process that could take at least another six months from the date that the Commission endorses them—whenever that may be.
On November 10, 2015, Steven Maijoor, chairman of ESMA, announced in a speech to the Economic and Monetary Affairs Committee of the European Parliament that the January 3, 2017 deadline for MiFID II implementation was going to be difficult. He said: “The timing for stakeholders and regulators alike to implement the rules and build the necessary IT systems is extremely tight. Even more, there are a few areas where the calendar is already unfeasible. This relates to the fact that it will take some time, and well into 2016, before the text of the RTS will be stable and final. The building of some complex IT systems can only really take off when the final details are firmly set in the RTS and some of the most complex IT systems would need at least a year to be built.” He added “We have therefore raised these timing issues with the European Commission, and the fact that some IT systems will not be ready in January 2017, and the uncertainty this will create as they are needed for the execution of certain elements of MiFID II. Related to that, we have raised with the Commission whether this uncertainty would need a legislative response with delaying certain parts of MiFID II, mainly related to transparency, transaction and position reporting.”
It also has been widely reported that Martin Merlin, director for financial markets at the Commission, has acknowledged that further delay to MiFID II may be necessary particularly so as to smooth the implementation process. In his view, the simplest and most legally sound approach would be to delay the whole package by a year, which would shift the start date to January 3, 2018.
However, any delay would need to be agreed upon between the Commission, European Parliament and Council of Ministers, and would likely entail implementing a further piece of EU legislation to defer the start date.
The full text of Mr Maijoor’s speech is available here.
A Reuters article on Mr. Merlin’s comments is available here.