Mifid II Makes Headlines Without News

Perhaps that's why it didn't really make the mainstream press in such a huge way. While it was the lead story here on Waters and our competitors in the B2B sector, a glance of the major UK newspapers showed no reflection that Europe had agreed its biggest reform of the securities industry in years. Indeed, the only thing that was really noticeable the day after was a piece about commodity speculation and food prices.

I suspect that's partly because stories about securities regulation are, in all honesty, pretty dry affairs. They lack the cyberpunk pizzazz of algorithmic glitches, or the pseudo-noir clandestine thrill of hack attacks. There's just a lot of PDF files, EU-specific verbal grandiloquence, and puzzling acronyms that you only ever find in documents beginning "A proposal for a directive of the European Parliament and Council." But it's also because most of Mifid II was pretty much as expected. Indeed, the most relevant parts to Waters' readership, such as algorithmic trading controls and the establishment of organized trading facilities (OTFs) were entirely as expected. Better than hoped in some quarters, with the omission of minimum resting periods and the exclusion of equities from mandatory OTF execution.

It's been such a long period of waiting for this text that it's easy to jump on the trilogue announcement, clap your hands together, and think of Mifid II as done. But it isn't. This is the period where the real work begins, now that the European Securities and Markets Authority has been tasked with the technical work associated with implementing Mifid II (and, of course, the regulation that accompanies the directive).

Ready, Set, Stop!
It's just starting to feel a bit like the EU is late to the party, again. Internecine conflict during trilogue meant that most persons associated with the political process hardly covered themselves with glory, and the pace of change has been abysmal in comparison to the US. I know that the launch of swap execution facilities and the implementation of Dodd-Frank Act rules hasn't been smooth, but at least they're forging ahead, and are thus setting the bar for convention and operation.

In Britain, there's an odd dual view held towards Europe by the English, at least. While most people accept the need for us to be in the EU, we hold it at arm's length, argue incessantly for exceptions, and refuse to participate in the process until the last minute. As an inevitable result, the effect of EU legislation on Britain can, sometimes, be unfortunate, but it's entirely our own fault, because we dither and procrastinate when it comes to getting stuck in. It feels a bit like that with Mifid II, in that while the US was forging the narrative, Brussels was arguing, and thus took too long to actively shape the future marketplace, leaving European markets to be largely reactive to US policy.

Indeed, the most relevant parts to Waters' readership, such as algorithmic trading controls and the establishment of organized trading facilities (OTFs) were entirely as expected.

Whether this will result in stronger regulation, I don't know. I hope so. I suspect, though, that it'll result in patchy rules that require stitching together at a later date. But for the moment, at least, there's some progress.