Today, ESMA has published the long-awaited MiFID II Technical Standards, leaving implementation teams across the industry with hundreds of pages to get to grips with. The publication confirms that MiFID II will represent the biggest change to the regulatory framework in living memory. It represents an extremely complex puzzle, but at least now we have one of the corner pieces on the table.
These regulatory technical and implementing standards (which essentially cover everything other than investor protection) run to 552 pages – and every word counts – so clearly some time is needed to digest it all. On top of this, ESMA published technical standards for MAD/R and CSDR, both of which have key points of crossover with MiFID II, meaning a total headache-inducing 2505 pages were published in one day.
The good news is that, in key areas such as transaction reporting (where we remain with 65 fields), today’s new text doesn’t look too far away from the version that the industry has been working from since the summer. However, there are still areas of change, and how all of this will fit in with the as-yet-unpublished delegated acts remains a mystery.
Some key deltas are:
- Bond transparency: ESMA have indicated that, under the terms of the technical standards and current market data, 2,000 bond instruments will fall under the transparency thresholds. This will amount to 4% of the European market
- Position limits: Set to be determined through two sets of criteria; an asset specific market share threshold and a ‘main business’ threshold
- Market data: Venues will be required to publish their data in an unbundled manner.
Though it has reduced, there still remains some uncertainty but, nevertheless, the punchline from an operational point of view is clear … the industry has until December to formalise implementation plans across key workstreams:
- Investor protection. Contingent on delegated acts to be published around the turn of the year, we currently have 20 MIG risks registered
- Mainly now in the public domain but subject to Brussels confirmation. We currently have 40 MIG risks registered
- Governance and systems and controls. Split between what we got today and the delegated acts. We currently have 17 MIG risks registered.
The conclusion to draw from these texts is that MiFID II is now as ready as it is going to be for implementation teams. Having your ‘change the bank’ and ‘run the bank’ people validating the known unknowns and building implementation assumption using a risk-based approach is the order of the day. To achieve this, industry collaboration and vendor coordination, through working groups and trade associations, will be vital.
In this spirit, our MiFID Implementation Group (MIG) has agreed a robust agenda for the next few months. The next 8 meetings will be focusing on:
- Record keeping
- Transaction reporting
- Product governance
- Derivatives trading obligation
- Best execution
- Positioning and commodities
- Information to clients
- SI transparency.
To get your firm a seat at the table, get touch with the team at firstname.lastname@example.org