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Brexit, Mifid, Uncategorized

5 months later, how is MiFID II going?

Yesterday was the 5 month anniversary of the start of MiFID II.  In many ways, things have settled down since then, although there have been some developments over the past weeks (see here for a list of these already covered). While all has been relatively quiet in the world of energy and commodities, there is still quite a bit of activity in the wider financial world, with Andrew Bailey, Chief Executive of the FCA talking of a “lot of progress” on this video on Bloomberg.

ESMA recently issued several new Questions and Answers document on MiFID II, including:

  • Data reporting (here)
  • Investor Protection (here)
  • Market Structures (here)
  • Transparency (here)

The transparency answers include some on how accessible “trade reporting” data is to others and when it should be published. There have been many discussions recently on the usefulness of data being published so far, for example as reported here on the Financial news web site. . This Q+A goes some way towards addressing these. This post on the ClarusFT web site goes into the topic in some more detail.

In terms of investor protection, 30th April saw the start of the requirement to publish “top 5 execution venues” under RTS 28. 30th June sees the start of further publication requirements under RTS 27. This matter is reported on this article on the Thomson Reuters web site. On a related topic, this article on eFinancialCareers reports on how the increased emphasis on central risk books has caused changes in hiring patterns.

One area that is receiving a great deal of focus is that of LEI use. Originally, any investment firm trading with the appropriate category of counterparty  or issue was only allowed to if the possessed  a valid Legal Entity Identifier, including on EU entities. This rule whoever was delayed for 6 months close to the deadline (see here). With the new deadline coming up, many are pushing  their counterparties to obtain LEIs.  This article on the practical Insight web site looks at some potential consequences of this rule. For example, trading venues will likely remove instruments issued by non EU entities with no LEI, which could push trading back to voice. This article on Markets Media looks at how LEI issuance will continue to rise over the coming period, and this one by Gary Stone of Bloomberg Trading Solutions on the Tabb Forum looks at what happens in the event that there is no LEI.

Another important topic under MiFID II has been the impact of “research unbundling”, that is the requirement that companies may not provide research as a complimentary add on to services provided. This particle on the Hedge Week web site looks at how the matter is unfolding.

One interesting discussion is the impact of Brexit on MiFID II. Whilst the impact of Brexit in terms of MiFID II compliance is covered separately (see here), this article on the Financial News web site reports on the possible scrapping of the “open access” part of MiFID II in the event that a deal acceptable to the EU 27 is not reached on Brexit.

In energy and commodities, the answer from the European Commission on whether the market size test is to be carried out on a group basis is awaited (see here), as are more position limits opinions (see here) as well as the bedding down of some remaining position reporting aspects.  As a result, while things are quiet for those in the sector at present, we can expect some activity in the near future. In the meantime, this interview with Kay Swinburne MEP on the Professional Adviser web site on “what we intended with MiFID II”, also discusses what could be in “MiFID III”.


About avivhandler

Aviv is the Managing Director of ETR Advisory, a niche consultancy focused on the regulation of the commodity, energy and financial markets. He has more than 23 years of experience in the financial, energy and commodity markets, covering regulatory compliance, credit, risk and financial technology. Prior to founding ETR, he was Partner at SunGard Global Services, where he built a Centre of Excellence in European Energy and Commodity Regulation. Before that, he founded Coherence, a consulting firm specializing in credit risk in commodity and energy trading as well as software product management. The credit practice ultimately became part of Sirius Solutions, where he was the Managing Director of Europe. He has also held management roles at KWI and Iris Financial, among other organizations. Mr. Handler holds a degree in computer science from Imperial College, University of London.


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