Investors and financial firms brace for Mifid II regulatory shake-up
Europe’s Markets in Financial Instruments Directive – Mifid II – will go live on Wednesday.
One of the final packages of reforms following the banking crisis will come into force on Wednesday, putting investors and financial firms in line for a major regulatory shake-up.
Europe’s Markets in Financial Instruments Directive – Mifid II – is an attempt to provide greater protection to investors and shore up transparency throughout the financial system.
The body of measures includes around 1.7 million paragraphs of rules covering the EU’s entire trading system, from brokers, hedge funds and institutional investors, to banks, exchanges and traders.
Catherine McGuinness, the City of London Corporation’s policy chairman, said the implementation will be a “real watershed moment” for financial regulation.
MiFID II launching tomorrow marks a real watershed moment for financial regulation. Read more here: https://t.co/UDox2THN3A— Catherine McGuinness (@City_McGuinness) January 2, 2018
She added: “It will be the last major piece of regulatory reform following the financial crash of 2008.
“Financial and professional services firms have worked hard in recent times to implement these onerous and complex changes.
“While they have been a big distraction for firms, I am certain they are well-placed to strengthen their position in the global marketplace.”
Among the changes, asset managers will now have to pay for the research that prompts their investment decisions, as regulators clamp down on potential conflicts of interest which could harm investors.
It will also attempt to help regulators pinpoint risks by making institutions report information about trades instantly, with bond traders having to tell the market about their deals within 15 minutes of them being secured.
Giles Edwards, S&P global ratings analyst, struck a downbeat tone over the regulation.
He said: “Given its scope and the fundamental changes to market structure that it will promote in some areas, Mifid II is a hugely important regulatory development, and one that reaches beyond the EU or EEA.
“Over the longer term, the disruptive nature of this major regulatory change will become more apparent, and the winners and losers will likely emerge more clearly. There will likely be more losers than winners.”