Market participants have voiced concerns over the alignment of reporting requirements under the Markets in Financial Infrastructure Directive (Mifid) II and the Market Abuse Regulation (MAR).
Under MAR, which comes into force on July 3 this year, firms will be required to submit regular, detailed transaction reports. Meanwhile Mifid II goes even further, insisting that firms monitor all trading activity passing through their systems. Because both regulations work towards the same goal of maintaining the competitiveness, integrity and efficiency of EU financial markets, they must be updated simultaneously to ensure coherence. For example, reaching the political agreement on MAR was subject to agreement on Mifid II first, as the latter contains part of the former’s framework.
The one-year delay of Mifid II implementation to January 2018, announced by the European Parliament in February, has raised questions over this coherence.
“We recognise that there is going to be quite a significant issue when the two aren’t implemented at the same time,” said Stephen Hanks, a manager in the markets division at the Financial Conduct Authority (FCA) at the Association for Financial Markets in Europe’s (Afme) Market Liquidity conference last month.
KEY TAKEAWAYS
Market participants have voiced concerns over getting ready for the incoming Market Abuse Regulation in light of the recent Mifid II delay;
The lack of detailed guidance on Mifid II gives firms little certainty over how to implement measures;
Regulators have warned that firms will have to make their own judgments on some aspects.
He explained that the FCA will work with the industry on the data challenges and issues surrounding transparency thresholds and transaction reporting – once the guidelines are complete. “But it is going to be necessary for firms to make their own judgments, because there won’t be guidance from the regulators on everything,” he added.
The concept of organised trading facilities, as well as small and medium-sized enterprises growth markets and emission allowances or auctioned products based on them, are areas all introduced in Mifid II but referred to in MAR. The European Commission published a draft regulation in February, amending MAR to state that those provisions will not apply until the new Mifid II application date, but uncertainty remains.
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"Any indication that sense may prevail is welcome" |
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“We’re in this sort of Neverland state where if we don’t start reporting in June, we’re contravening MAR, yet we’re still waiting to see what else is coming with Mifid II,” said Chris Leonard-Appleton, director of regulation at Thomson Reuters, during the panel. “Any indication that sense may prevail is welcome.”
But Christian Voigt, a senior regulatory adviser at Fidessa, said the industry has always known there would be a gap between implementation of the two regimes. “Of course, changing the six month transition period to 18 months does complicate things, but in the bigger picture of what firms need to be worrying about, it’s not at the top of my list of concerns,” he explained.
Even so, there is no denying that the market needs more information – namely the technical standards and guidelines that form the level two texts, which are essential to implementation and compliance.
“What I’m worried about is the lack of clarity on the delay,” added Voigt. There has been some speculation that policymakers may take advantage of the delay and use the time to make further changes to the regulation itself. “It worries me that they could start renegotiating parts – how much certainty can we have, when we all agreed a while ago that those things were sensible?”
See also
Market Abuse Directive: what the EC did wrong
Mifid II: excess of ambition, lack of action