ESMA has called for delays to the MiFID II implementation deadline. While some commentators have suggested this puts an end to the punishing timeline that the industry is currently wrestling with, things are rather more complicated, and an industry-wide sigh of relief may be premature.
First of all, ESMA cannot force a delay, that’s a decision for the European Commission (EC). Even if Steven Maijoor, ESMA’s Chair, has concerns around the “unfeasible” MiFID II calendar, the EC might not agree with his assessment. We had a similar situation in 2013 when ESMA asked for a delay to the EMIR trade reporting rules. Back then, the EC declined to sanction any extension of the implementation deadlines. For their pleas for a delay to succeed now, ESMA and the industry may need stronger arguments than those tabled to date, including concerns over the challenging timescales for their own readiness, and for financial market participants to build the necessary IT systems.
Given that it may now be several more months into 2016 before the text of the Regulatory Technical Standards (RTS) is officially ‘final’, ESMA’s view is that a 6 month implementation period is (at best) extremely tight. ESMA’s work on the collection of financial instrument reference data and trading data alone is a hefty project which Maijoor recognises as probably more multi-faceted than its MiFID I predecessor which took 3 years to implement. With this a key component to driving, amongst other things, new pre- and post-trade transparency rules, will the regulators themselves even be ready?
It is unclear whether a blanket delay of the whole of MiFID II could address the concerns raised and it is important that the current momentum is retained. ESMA only suggests delays to the implementation deadline for “certain parts” of the rules. Judging by what was covered in Mr Maijoor’s recent speech to the European Parliament, topics such as non-equity transparency, position limits and ancillary activity might be in scope, leaving large chunks of MiFID II still on track for the January 2017 deadline.
Ultimately, over the months ahead, MiFID II requirements will be shaped as a result of a delicate balancing act between the adoption of the RTS, the delegated acts, the transposition into national laws and changes to regulators’ rule books.
The widespread impact of MiFID II on all European investment firms and trading venues is undeniable, requiring them to update their systems and review working practices. So while delaying MiFID II go-live is an important discussion to be had, implementation teams will nonetheless have to keep the pedal to the metal and push ahead. There is still a great deal to do.
Anne Plested is head of EU Regulation Change Programme at Fidessa