RegTech Intelligence

Market has its say on MiFID derivatives reforms

By Jon Watkins, The TRADE.

European regulators opened their doors to market participants this week, who had their voices heard on the key points of MiFID II relating to the derivatives markets.

Trade reporting, open access to clearing houses and high-frequency trading were just a handful of the contentious topics discussed during an two-days of open hearings in Paris.

The meeting addressed the European Securities and Markets Authority’s (ESMA) 844-page consultation paper released in May.

“The open hearing went well,” an ESMA spokesperson told “It gave ESMA the opportunity to explain and clarify our consultation paper and to receive helpful comments and feedback from participants.”

The transaction reporting requirements under the MiFID II revision include 93 fields, with ESMA aiming to collect all the relevant information to bring transparency to the markets.

With trade reporting mandates already in place for the European Market Infrastructure Regulation (EMIR), the logistics of how both will work together going forward was also debated.

ESMA highlighted that the information is not meant to be reported twice, with the focus on the information reaching regulators as the main priority.

One big ask to come out of the hearing was ESMA’s request for data from the industry to support the sweeping new rules.

“One of the issues with MiFID II politics, was they didn’t have the data on the table to back up the level one policy decisions they were making last year,” said PJ Di Giammarino, CEO of regulatory think-tank JWG

“So consequently, there are now all sorts of requests from the Commission to ESMA which require detailed policies based on facts they need to go gather from the industry.”

With some push back from the audience, the regulator reiterated firms’ obligations under the third money laundering directive, which mandates a rolling review of firms’ counterparty information.

From major buy-side players to trade associations and smaller national savings banks, hundreds of representatives from around the world were in attendance to discuss the crucial cogs making up Europe’s new regulatory machine.

Any expectations of the rules easing into the markets like clockwork though, will have subsided when considering the work left to be done alongside an ambitious implementation timeline put forward by

While January 2017 may sound far away, this two-day discussion on MiFID revisions was called as part of the first of two consultation processes launched by the regulator in May.

The road towards finalising the directive still has to go through a second consultation, drafting of regulatory technical standards and a review by the newly appointed European Commissioners, before the long and arduous implementation phase takes place.

All this remains ahead while the discussion over the key points of MiFID II rages on.

Di Giammarino went on to say that the time to debate the merit of MiFID II is over, and the hearing gave everyone a chance to try to iron out the details within the regulation.

“It was really a tale of the different business models in Europe reacting to big change drivers of transparency and fairness in the capital markets,” he said.

“We like to characterise this as the initial skirmish stage. It was very much both sides having a bit of a shadow box around these key issues.”

Other issues debated during the hearing included rules over the revealing of algo source codes, consolidated tape and open access to clearing houses.

The debate over inducements was a lengthy one, with MiFID looking to curb the charging of fees for independent advice.

“They have gone with a very hard line interpretation of how you bundle and disclose your costs to all types of customers,” said Di Giammarino.

With many aspects of MiFID still uncertain and being discussed, finalisation of the regulation feels far away.

However the consultation period has given the market a chance to weigh in on the debate and have a chance to influence the forthcoming rules.

The deadline for participants to have their say on the consultation paper is 1 August 2014.

Firms should also be looking to ready themselves for the overhaul sooner rather than later according to Di Giammarino.

“The timing is going to be critical,” he said. “People are preparing budgets now where they have to make estimates now about how much of their resources they need to throw at this in a few months’ time.

“If their gap analyses are not really ramped up by Q1/Q2 they will be falling behind. The scope and effort is massive and we all know how painful EU change can be when left to the last minute.”

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