The European Commission has approved a deal between its
Council and Parliament over its Mifid II reforms but various
hurdles still stand in the way of the far-reaching regulation,
writes Jonathan Watkins.
The European Permanent Representatives Committee said on
Thursday it had approved on behalf of the European Council the
compromise agreement struck with the European Parliament in
This leaves the bill needing to
pass through the Economic and Monetary Affairs Committee (ECON)
on March 3 and a plenary in April before continuing its long
journey towards implementation.
The live date for the implementation of the European
legislation is still pencilled in for 2016 as agreed at the G20
summit in Pittsburgh in 2009.
While regulators have been quick to herald the agreement as
a milestone, there remains a lot of work still to be done in
order to implement Mifid II.
Only 700 of the 18,000 pages of Mifidf II text have been
published and some 106 technical standards still need to be
published for consultation.
According to regulatory think tank, JWG, over the next three
years more than a thousand regulatory documents will be
published, both by European and national authorities, relating
to Mifid II.
"All of that information is going to have to be read,
analysed and acted upon, so the workload is enormous," said PJ
Di Giammarino, chief executive of JWG.
"While the Mifid II and MiFIR text is now close to being
finalised, this only marks the start of a long tug of war
between market participants and regulators ahead of expected
implementation in 2016."
JWG said the next step for the legislation is for lawyers to
begin correcting inaccuracies and inconsistencies in the text
which will then be subjected to a consultation and discussion
This is something the European Securities and Markets
Authority (ESMA) will be working on with the European
According to Ed Parker, head of derivatives at law firm
Mayer Brown, if the slow rollout of the European Market
Infrastructure Regulation’s (Emir) clearing
requirement is anything to go by, the market could be waiting a
"ESMA will still have to cover and formulate rules for the
technical and implementing points, and this will involve some
decisions on controversial points," said Parker.
"Looking at the path taken by ESMA for EMIR, movement will
be slow and subject to intense lobbying, and the detail of
these rules will affect whether there is a positive or negative
balance between investor protection, and cost and
"It will be some time before we know the final shape of
In its latest workplan, ESMA said it will continue its
preparatory work on the Mifid II Level 2 empowerments, with a
view to consulting as soon as possible after the legal text is
The authority will likely be working with the European
Commission on implementing the technical standards for Mifid
through this year.
"ESMA identified more than 100 separate documents, covering
regulatory and implementing technical standards, technical
advice and guidelines and recommendations," said Christian
Voigt, product manager at Fidessa.
"ESMA has to deliver a good share of these documents within
12 months of Mifid II / Mifir entering into force, while the
rest may be even later."
The Mifid directive and the related Mifir regulation are
aimed at promoting the integration, competitiveness and
efficiency of the EU financial markets.
The legislation is also looking to curb commodity
speculation through position limits, move derivatives trading
onto organised venues and tackle the issue of high frequency
It will also introduce Organised Trading Facilities for the
trading over over-the-counter derivatives, much like swap
execution facilities (Sefs) in the US.
It has been four years since the European Commission, Union
and Parliament agreed on Mifid II and the market is still
potentially three years away from seeing the rules
With the amount of time spent analysing and perfecting the
text, participants will be hoping the aims of the directive are
achieved and the market ultimately benefits from opening up
competition and increasing transparency.