MiFID II: Are the Regulatory Gloves About to Come Off?

The much-heralded Markets in Financial Instruments Directive II (MiFID II) finally came into force on January 3. This transformational regulation has been created to ensure fairer, safer and more efficient markets and enable greater transparency for all market participants. MiFID II has brought in new reporting requirements and tests that will increase the amount of information available and reduce the use of dark pools and OTC trading.

As we have reported on this site, however, many firms have struggled in their preparations for MiFID II. This is likely a result of the sheer complexity of MiFID II compliance and the fact that financial sector firms’ compliance teams have also had to prepare their businesses for other new regulations; such as the EU’s Benchmarks Regulation and Market Abuse Regulation. As a result, MiFID II has got off to a shaky start, with both regulators and regulated struggling in their new obligations.

However, as this article in the FT makes clear, it is important that the slow start to MiFID II enforcement should not lull financial sector firms into a false sense of security. In some cases, Regulators have been allowing a period of grace, but it is likely this period will soon end. In the UK, the FCA has already started to release studies on MiFID II compliance, perhaps signalling its intention to tighten up their oversight of firms’ compliance efforts. It surely won’t be long before other regulators follow suit and start cracking down on firms in breach of the Regulation.

It is therefore time for financial sector firms to get their houses in order and meet their obligations under MiFID II. Compliance teams have been daunted by the scale of the task at hand, but there are ways of simplifying MiFID II compliance. Once such is to leverage the managed compliance solutions that are now available on the market.

The benefits of the managed services approach are clear. There is, of course, a significant cost benefit: based in the cloud, these managed services leverage economies of scale to deliver firms a lower cost of ownership compared to in-house development. But, more important for now, is that the managed services route accelerates time-to-compliance. For firms that have yet to make significant progress in their MiFID II compliance efforts, it is the best way to ready themselves before the Regulatory whip begins to crack.

MiFID II and other regulatory topics will be discussed at RIMES’ upcoming EMEA Client Conference, which will take place in London on May 2. To register, email: events@rimes.com


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