FACT: MIFID II SUX. HERE’S HOW TO DEAL WITH IT…
By Rob Shapiro
Succinylcholine (aka “SUX”) is a neuromuscular paralytic agent that triggers muscular paralysis including those used for breathing. While doctors regularly use SUX during anesthesia protocols, it’s also often part of the three-drug mixture in lethal injection executions. SUX is one scary drug.
In the capital markets today, MIFID II is the functional equivalent of SUX. While MIFID II has spurned frenetic compliance activity it has also paralyzed much of the capital markets ecosystem from head to toe. Major players, including investment firms, broker dealers and trading technology companies have taken a “wait and see” approach to MIFID II given its plethora of “unknown unknowns”. To be fair, it’s not a great idea to set sail on a stormy night without a compass or the stars to guide you.
Here’s a (short) list of questions that keep many of us up at night:
Will the equity execution space consolidate?
Will fixed income liquidity continue to fragment?
Will MIFID II standards spread across the globe like avian flu?
Will MFID II data demands require an OMS/EMS upgrade?
Will the “digitizing of BestEx” accelerate trading automation?
Will the cost of MIFID II compliance crush small investment firms?
Will the supply and demand curve for investment research ever look normal?
Guess what? No one knows—not even the silky smooth, talking head consultants that charge $650 per hour—and they’re wicked smart. So, while it’s true the only certainty in life (and all industries) is uncertainty, the financial services sector adds an important element to this truism: RELATIONSHIPS WILL ALWAYS MATTER.
A colleague of mine often reminded me of this obscure Golden Rule: “Relationships are either moving forward or backwards—they are NEVER standing still.” How true! More so, this is precisely the time of year to strengthen your relationships with your clients, brokers and technology partners—and anyone else you consider a vital professional connection. Think about it: everyone is struggling with the same MIFID II worries and questions. As pessimistic as this axiom is, misery REALLY DOES love company! Staying tethered to your workstation over the next few months (mostly surfing the Net…) isn’t helping you, your firm or anyone else—especially those who would LOVE to share your (MIFID II) misery or if you’re truly blessed, your mirth!
Despite all the chatter about automation, artificial intelligence, augmented intelligence, big data and Bitcoin, the financial sector is STILL A PEOPLE BUSINESS. Not the people living inside your iPhone’s social media Apps—the one’s that work for other companies—and live in other cities. Real people. Not digital avatars. And these people—your clients and partners, will always place a premium on integrity, trust and loyalty. NO machine in our lifetime will be able to express these sacred attributes.
MIFID II is well past the clubhouse turn and is now sprinting towards the finish line. It’s time to stop worrying about MIFID II and start talking about MIFID II with the people you spend more time with than your family: your clients, brokers and technology partners. Staying paralyzed like you’ve been injected with a dose of SUX is NOT how you deal with MIFID II. Getting out of your seat, away from your screens and seeing the people you need to see is what you should be doing over the coming months. Remember: relationships still matter and they NEVER stand still.
There are three key areas where action is required.
Some material changes have come out of ESMA’s review of algorithmic trading.
A consolidated tape will significantly improve transparency and create a level playing field.
AFME said there should be mandatory free data contribution to the consolidated tape.
The review is an opportunity to recalibrate MiFID II regulations post-Brexit.