RegTech Intelligence

MiFID II: strategic and business model implications

The revised European Markets in Financial Instruments Directive (MiFID II) looms over the regulatory horizon like an oncoming storm in the financial services industry.

Aiming to improve the safety and transparency of financial markets, MiFID II reaches far beyond investment banks, impacting asset managers, commodity firms and OTC brokers and dealers too.  In terms of depth, the regime will fundamentally reshape the way business is done – from requiring comprehensive audit trails and full surveillance of the trading lifecycle to assessing the suitability of clients before any marketing takes place.

It is for these reasons that the industry must adapt and evolve to comply with MiFID II together.  The current legacy systems favoured by the majority of institutions will not be able to cope with the changes ahead.  Indeed, even the regulators have had to delay MiFID’s implementation due to the sheer scale of the IT system restructuring required.

A key area the industry should collaboratively be working on is transaction reporting, where the duplicity and inconsistency of fields and formats will surely cause the greatest headaches on implementation day.  JWG analysis of the 687 transaction reporting fields used across MiFID II, EMIR, REMIT and SFTR suggests that approximately 40% of these fields are talking about the same facts.  Of this 40%, field definitions are similar for around 63% and formats broadly align for 58% of these common fields.  Clearly, if the industry were to work with the regulators to produce a common reporting format for all these regulations, it would save time and resources on both sides; let alone achieving the desired goal of enhancing financial stability through reducing the occurrence of the “garbage in, garbage out” conundrum.

On Tuesday, 28 June, industry actors will gather together to hear expert insights on the implications of MiFID II for business models and strategies.  The event, hosted by City and Financial, will witness a keynote address from the FCA before hearing a large panel of speakers addressing a range of topical questions.  Having heard plenty from the politicians on the benefits of a safer financial system, it is nevertheless essential to understand how the transition and adaptation to meet these new requirements can take place, if it is to do so effectively without hitting firms’ profitability.

Senior management and MiFID II implementation teams will no doubt find this event an important spoke in the wheel of their systems and business model adaptation planning.  The range of speakers will inform attendees of the advantages of acting collaboratively and proactively to gain a source of competitive advantage over those who do not adapt to the inevitable.  You can find more details of the topics up for discussion, as well as register your attendance (places are filling fast!), here.

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