More Board Discussions on MiFID II

Shanny Basar

More than three-quarters of fund managers said they are spending more time discussing regulations with senior management and boards as MiFID II, the regulations covering European Union financial markets, come into force in January 2018.

State Street commissioned Oxford Economics to survey 100 global respondents, consisting of 50 hedge funds and 50 asset managers, in August this year to gauge their readiness for MiFID II. In the survey 78% of respondents reported an increase in time spent discussing regulations with senior management and boards.

In addition nearly three-quarters, 73%, of asset managers are concerned about the challenges presented by MiFID II, and in particular believe that the pre-trade and post-trade transparency requirements will have the greatest impact on their firms. The original MiFID regulations covered equities while MiFID II extends to other asset classes including commodities and fixed income.

Kim Newell-Chebator, Europe, Middle East and Africa head of global markets at State Street, said in a statement: “The level of reporting required is a significant data undertaking; and tools that facilitate this are of increasing interest to our clients. MiFID II also supports a shift to electronic platforms. Whilst a welcome move for modern-day trading, venues will need to ensure they have effective safeguards and systems in place to ensure they remain compliant and controlled.”

The survey also found that to implement regulatory change, nearly 60% of respondents believe better data and analytical tools will help navigate the increasingly complicated landscape.

In addition to MiFID II, reporting by European firms are also affected by other rules such as the European Market Infrastructure Regulation and Securities Financing Transactions Regulation, which is slated for the second half of 2018.

In a speech in September Valdis Dombrovskis, the European Commissioner in charge of financial services, said authorities will look at how to safely reduce reporting burdens, particularly for non-financial firms, and develop new technology to standardise data.

“If we can reduce that burden and achieve the same prudential objectives, we should,” Dombrovskis. “The Emir review will look at how to safely reduce burdens from the ‘dual reporting’ obligation – particularly for non-financial firms. We are also taking forward a project on data standardisation to improve reporting with new technology.”

The Emir regulatory reporting mandate came into force in February 2014 but the European Commission is legally required to report on the regulation to the European Parliament and the Council. So the Emir review is likely to be the next significant EU regulation update and could be published before the end of this year.

Anthony Arnold, regulatory and operational compliance director at reporting platform Abide Financial, said in a blog: “For transaction reporting, this is the first regulatory legislation review process that is progressing towards completion and, yes, we can confirm that both MiFID II and Securities Financing Transactions Regulation also contain similar regulatory self-review provisions.”

Steven Maijoor, chair of Esma, said in a speech in June that Esma learnt a lot from Emir when reporting was introduced in a “big-bang way” and aims to structure SFTR reporting and data collection so that the industry only needs to make limited updates to their systems to ensure compliance. In addition Esma is also looking to standardise SFTR reporting requirements with MiFID II.

“To be clear, this doesn’t mean that all the data fields reported under SFTR, Emir and MiFID would be exactly the same, which would put into question why three reporting regimes were envisaged in the first place,” said Maijoor. “But where the same type of information is required, it should be as standardised as possible.”

Maijoor added that trade repositories process more than 350 million submissions each week under Emir and Esma expects that under SFTR they will be better prepared right from the start.

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