MiFID II Is Closing and Many Firms Are Ready. Many Others, Well, Aren’t

With less than 130 days to the MiFID II implementation deadline there are still industry concerns about the ability of many investment firms to be compliant with all aspects of the regulation.

Investment firms who are better placed to meet the deadline are those firms that have worked closely with their peers, industry representative groups and software solution providers to reach a consensus on their interpretation of the regulatory requirements and have had open discussions as to how best meet to requirements.

Big Teams, Small Teams

In addition, those firms who took a “divide and conquer” strategy by spreading the workload across dedicated teams focusing on specific aspects of the regulation, coupled with strong programme management are generally more advanced in their MiFID II preparation than other firms who left it to a small team of people, often relying on in-house solutions.

Sourcing the data content required to fulfil transaction reporting, indirect costs disclosure and product governance still remains a headache for much of the industry.

Implementation of MiFID II transaction reporting (RTS22) seems to be the topic where firms have made the most progress. This is not surprising given that this remains the most clearly defined element of the regulation and the highest priority topic for many firms.

A Quite Variable Comfort Zone

While firms may be feeling more comfortable with their progress on transaction reporting, they seem to be less advanced in choosing an Approved Publication Arrangement (APA) required for trade reporting transactions executed “off venue”.

Firms are in varying degrees of readiness to ensure that they comply with costs and charges disclosure. In particular, firms must have an ex-ante solution in place and, from an ex-post disclosure viewpoint, ensure that they are capturing from day one all direct service and transaction costs charged to their clients.

On a more technical note, implementation teams have only recently received confirmation of the updated MiFID II FIX protocol “rules of engagement” requirements for trading platforms, executing brokers and APAs.

In summary, “the jury is still out” as to whether the January 2018 deadline will be met by many firms.

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