MiFID II Delayed as Regulator Admits to Rushing Through Emir

Terry Flanagan

Industry concerns that politicians and regulators in Europe are struggling to cope with the amount and complexity of new regulations that are set to descend on the region’s capital markets appear to be being borne out.

Yesterday, European parliamentarians on the Economics and Monetary Affairs Committee (Econ) postponed a vote on the updated Market in Financial Instruments Directive (MiFID II)—a key piece of securities reform looking to tighten up regulation in the wake of the 2007 original, which is being split into a directive and a regulation—as well as the revised Market Abuse Directive (MAD) due to political wrangling. Markets Media has been told that any subsequent vote by Econ is not now likely to happen until September or October, after the parliament’s summer recess, at the earliest.

“It is not wholly surprising that the vote has been postponed,” Judith Hardt, secretary-general of the Federation of European Securities Exchanges, a Brussels-based group which lobbies on behalf of 46 of the region’s exchanges, told Markets Media.

“In May, Econ tabled over 2,000 amendments to MiFID II, a key directive for capital markets. The political parties need the time to discuss and agree on a shorter set of amendments in order to find the right compromise agreement and then go for a vote.”

Markus Ferber, a German center-right MEP and member of Econ, who is responsible for guiding MiFID II through the European parliament, had set a strict timeline for pushing the proposals through Brussels. In March, Ferber published his own report on the matter before setting a deadline of May 10 for MEPs of Econ to table amendments. He then wanted to see a vote on the amendments by July 9, which has now slipped.

There are many contentious issues in MiFID II that have still yet to be decided upon including market structure issues such as the creation of a new type of trading venue, possibly to be called an organized trading facility, and pre-trade transparency waivers; as well as measures to limit high-frequency trading and position limits on commodities trading.

After the European Commission proposed the draft law on MiFID II in October last year, it has remained before parliament waiting for approval awaiting to be sent to the Council of the European Union for its final blessing. MiFID II, an updated version of the original 2007 directive which harmonized regulation and increased competition and transparency across EU markets, had been pencilled in to be introduced by 2015 although this new delay could push things back.

Meanwhile, the European Securities and Markets Authority (Esma), the Paris-based regulator that was formed in January 2011 to report on financial supervision in the EU and hopes to have a staff of 100 on board by the end of the year, has admitted that some of the regulations it is drawing up detailed technical standards for are being rushed through.

Responsible for drafting the standards for MiFID II and MAD, among others, it is also in charge of writing the technical recommendations for the European Market Infrastructure Regulation (Emir), which is Europe’s answer to better regulating the opaque over-the-counter derivatives markets, in line with a diktat from the G20 group of nations. Many in the industry believe that the Paris-based organization is too stretched to handle all of these tasks.

In responding to this criticism, Steven Maijoor, chairman of Esma, agreed in part with the view. Regarding Emir, which Esma is focusing on at present, Maijoor said that on June 25 Esma had released a 300-page consultation paper on the technical standards that the industry will have six weeks to pore over but this, Maijoor admitted, would have been substantially longer if it hadn’t issued a similar earlier discussion paper in mid-February, just days after the EU’s three main bodies had reached political agreement over Emir, as well as holding an open hearing on Emir in March. On July 12, Esma expects to organize a second open hearing before submitting the final technical standards to the European Commission on September 30.

“So, over a period of about 33 weeks we will have had 11 weeks of consultation, in two steps and with two open hearings,” Maijoor told the Europlace Financial Forum conference in Paris earlier this week. “While I think that just over 33 weeks to complete technical standards is incredibly short, you can see that we do our utmost to get input from a broad range of stakeholders. As you are probably aware, Esma has always argued for a period of about 12 months for completing technical standards.”

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