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Markets in Financial Instruments Directive II – an update

Business meeting Print publication

10/11/2015

On 19 October 2015, the Financial Conduct Authority’s director of markets policy and international, David Lawton, gave a speech at the MiFID II Wholesale Firms Conference regarding the Markets in Financial Instruments Directive II (MiFID II) and the anticipated timeline leading toward its January 2017 deadline.

The speech was intended to assist firms to understand the remaining steps in the legislative process, both domestically and in the European Union, and to set out the FCA’s expectations of firms when implementing MiFID II. Mr Lawton highlighted the following anticipated key dates, but stressed that the timeline remained a “moving target”:

  • This month, proposals for the draft technical standards were agreed by ESMA and are currently under review by the European Commission. Following this, they will be subject to scrutiny by the European Parliament and Council. It is anticipated that the draft technical standards may be finalised by the first quarter of 2016.
  • Delegated acts, which were previously anticipated to be published over the summer, are now expected to be finalised in November or December of this year.
  • The FCA’s consultation concerning the implementation of domestic legislation is expected to be split due to an inability at this stage to review any finalised EU rules. Mr Lawton indicated that the first part of the consultation would be published in December, with at least a second consultation paper to follow early 2016.

The FCA’s expectations concerning authorisations going forward were clearly set out, with Mr Lawton stating that certain firms, including organised trading facilities; firms undertaking speculative trading commodity derivatives and firms utilising high-frequency trading methods, will be required to seek additional permissions or even go through a fresh authorisation process.

A new application form for those firms requiring additional permission, or in some cases a fresh application, is expected to be made available early 2016, with draft applications accepted from April 2016.

Mr Lawton acknowledged that achieving the necessary changes in the proposed deadline is “universally recognised as challenging. For everyone. Regulators included”. In his concluding remarks, Mr Lawton emphasised the scale of the change ahead and warned that firms should already be preparing for the January 2017 deadline.

Mr Lawton added that the topic should remain on senior management’s radar and should be adequately resourced to ensure effective implementation within the deadline.

Mr Lawton’s views were mirrored in a speech given at the conference by David Geale, director of policy at the FCA, regarding the effects that MiFID II will bring to the retail sector. Mr Geale stated that as the FCA does not yet have “the final implementing measures, which will set many of the detailed requirements that firms will face, we are not yet able to consult on or finalise our policy approach in all areas. But this does not mean that firms should simply sit back and wait.”

Similarly, Mr Geale warned firms about the dangers of complacency with respect to the new regime, stating that while it may appear that many UK firms are well placed to deal with the impending reforms under MiFID II as a result of existing requirements brought in by the Retail Distribution Review, firms should not “underestimate the extent of the changes expected”.

The key message from Mr Lawton and Mr Geale was that firms should be proactive in their preparation for MiFID II and work collaboratively with the FCA in implementing changes as far as the European legislative timetable will allow.

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