Are you ready for MiFID II? If not, don’t worry; you’re in good company. A recent Bloomberg survey of 170 firms found that 45% of compliance professionals are not ready to meet their upcoming MiFID II obligations.
The bad news is that planning for MiFID II isn’t getting any easier. 2016 was a turbulent year for the financial services industry and shifts in the political and regulatory landscape are still reverberating across global markets. Few firms can predict how the land will lie in 12 months’ time.
The outcome of Brexit is chief amongst known unknowns. As things stand, London, Europe’s largest financial centre, will find itself adrift of the EU and its lucrative single market come 2019. But whilst this is the most likely outcome, it’s not the only one. With no clear route forward, UK-based business must now consider all eventualities, which makes planning for MiFID II a significant challenge.
And then there’s Donald Trump. On the campaign trail, Trump claimed he would unwind some of the stringent regulations that have been imposed since the financial crisis of 2008, most notably Dodd Frank. Now that he occupies the Oval Office, this promise may well come to fruition. Could this mean that New York becomes the new home of Euro clearing?
The shifting political climate isn’t the only challenge for firms attempting to tackle MiFID II this year. The European execution venue landscape is also undergoing major change and this is likely to make it difficult for firms to plan for Best Execution, a key tenet under the Regulation.
The introduction of Organised Trading Facilities (OTF) may force many firms to shift OTC trading onto ‘lit’ exchange-type trading mechanisms. Meanwhile, the London Stock Exchange’s (LSE) planned merger with Deutsche Boerse may consolidate key market venues under a single market operator.
But whilst these changes introduce uncertainty they also present opportunities. If the UK breaks with the EU as planned, it will be able to forge lucrative trade deals with new partners. This raises the prospect of fresh sources of liquidity for organisations based in London. 2017 may well see the City enhance its status as Europe’s financial capital.
To harness new opportunities firms must plan for a future defined by flux. And for practitioners in the trading and electronic execution space the onus is on ensuring their trading infrastructure is optimised for MiFID II compliance.
In our new whitepaper we explore the challenges facing firms in the run up to MiFID II and explain how European, UK and London-based financial institutions can turn turmoil to their advantage.