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The Trading Mesh

MiFID II: What to prioritise for the next 100 days

Mon, 02 Oct 2017 02:04:00 GMT           

Report: Meet up discussion hosted by AQMetrics, supported by The Realization Group

Following the success of our inaugural London MiFID II meetup in July, AQMetrics hosted a second event in late September to work through some of the key issues in advance of the 3 January 2018. The event once again brought together industry professionals in a relaxed setting to better understand where to focus MiFID II priorities, as we enter this critical final stage before the new rules come into force.

Our expert panel, Stephen Hanks, Alicia Mellon, Jacqui Hughes, Robert Adler and Breige Tinnelly launched the discussions by identifying some of the most common MiFID II issues facing firms. The panel particularly looked at those issues not making the headlines but nevertheless of pressing concern to many in the industry, including the regulators themselves. Moderator Breige Tinnelly, Head of UK for AQMetrics, began by asking what challenges are impacting firms’ ability to plan and successfully comply with the new requirements – and if the market is truly ready for MiFID II implementation?

Seeking clarity

According to Alicia Mellon, Regulatory Reporting Project Specialist, Vanguard, one of the main issues lies in transaction reporting, particularly around the lack of guidance on corporate actions, with many on the buy side struggling as a result. In general, this lack of guidance from the European Securities and Markets Authority (ESMA) has resulted in Vanguard developing new systems, with a third-party vendor, based on guidance from the Investment Association instead.

Another area the buy side is struggling with is unbundling of research. Jacqui Hughes, Senior Regulatory, Risk and Change Management Consultant, KPMG, warned that the market had been hesitant to make any decisions – again due to a lack of clear guidance.   Robert Adler, Director of Business Development, Storm IT Financial agreed that unbundling is still a very big issue for the buy side, based on his interactions with clients, as is transaction reporting.

Causes for concern

However, for the larger investment banks, there are four common issues raised regularly with the FCA around MiFID II, according to Stephen Hanks, Manager of MiFID Co-Ordination for the UK’s Financial Conduct Authority (FCA), namely:

  1. IT build – In particular, where parts of their systems must interact with some other piece of legislation it is unlikely that systems will be complete in time for 3 January 2018.
  2. Pressures caused by policy uncertainty – There is also concern about vendors delivering on time as well as ISIN testing and whether ISINs will be registered on time.
  3. Trading venue readiness – Some venues are only expecting to able to provide new rule books in December and that certain new functionalities will only be added very late in the day. The buy side’s ability to cope with that is fairly limited.
  4. Complaints about their clients – The sell side has limited confidence in the buy side’s ability trade report and do not believe firms are on top of this issue.

So given only three months to go, where should firms be focusing their priorities?

According to Hughes, there is a notable divergence between the size of firm and its capacity for MiFID II. This is a challenge for the smaller firms considering a new level of transaction reporting must be underpinned by the right data and, in her opinion, most firms have not taken a strategic approach due to a lack of time, money and resources. Adler also warned about the implementation times quoted by vendors, such as the 60 days needed to install a fibre cable. He believes firms must be made aware of this and that they need to be able to show the regulator that they are at least in the process of putting new systems in place to meet the data requirements.


This article was first published by AQMetrics (a client of The Realization Group) - MiFID II: What to prioritise for the next 100 days