On 18 September, the Financial Conduct Authority (FCA) held a conference which addressed the agenda for Markets in Financial Instruments Directive (MiFID) II. Among other key speakers, David Lawton, the FCAs director of markets, and Maggie Craig, acting head of savings and investments, talked about the main changes and considerations for firms. Highlights from the conference are summarised below.
The European Securities and Markets Authority (ESMA) is currently working on 'being prepared' for MiFID II. It is working up concrete legislative proposals for early next year, but the overall message which came from the conference, is that ESMA is not yet ready. The FCA has stated that it is: "not 100% ready - but it will be ready". This is due to its work being intrinsically linked to ESMA's work on the level II measures. Because it is not yet able to work on clear implementation strategies, the FCA is encouraging industry to continue to work closely together with the FCA by providing feedback to it.
The FCA acknowledges that SMEs are likely to be some of the firms hit hardest by the changes introduced by MiFID II, so it has stated it will aim to implement provisions in most sympathetic way possible for those firms. While SMEs are acknowledged to be a fairly robust market, the effect of MiFID II on SMEs is unclear for these businesses and the question still remains as to how SMEs can ready themselves. How small businesses can attract liquidity is something that SMEs will need to consider.
The market data reporting requirements are a lot more rules based than we have previously seen which will make terminology fairly challenging for the FCA to implement and ensure clarity in terminology. This was one of the issues apparent with EMIR which will need to be closely addressed. While there is some overlap between European Markets Infrastructure Regulation (EMIR) and MiFID, firms should be aware of the different hurdles to the differing reporting regimes.
With respect to market reporting, as reflected in ESMA's discussion paper (2014/548), there will be an enhanced focus on data quality so that regulators will better understand the quality of the data it is receiving and will be better able to identify what firms are doing. This will be new for many firms that will not be used to the level of data being required for reporting.
Comments from the panel stressed that firms should ideally already have strong Senior managements, Systems and Controls (SYSC)...