Esma: Mifid III Not in the Works

Third phase of regulatory reform is not being actively considered at this point, insists regulator’s chairman.

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As the financial industry prepares for sweeping changes to Europe’s trading rulebook in 34 days’ time, the head of the continent’s market regulator has said that a third package of rules is not in the pipeline at present, despite suggestions from lawmakers that it could be on its way imminently.

The revised Markets in Financial Instruments Directive and Regulation, known as Mifid II, is due to enter into force on January 3, 2018, and will affect nearly every aspect of the trade lifecycle across asset classes within the European Union (EU).

Given the depth and breadth of changes, some have suggested that a third iteration of the rules may be forthcoming. Speaking to Dow Jones’ Financial News in October, a UK member of the European Parliament, Kay Swinburne, who has been a significant figure in the shaping of Mifid II, said that she could see Mifid III “around the corner.”

However, Steven Maijoor, the chair of the European Securities and Markets Authority (Esma), disputes that. Speaking to WatersTechnology, Maijoor says there are currently no plans in the works for a third package.

“Obviously, there is no other big reform in the pipeline after Mifid II, but what there will be is further fine-tuning of the existing pieces of legislation,” he says.

An outright denial that any potential variant of Mifid II is currently being worked on will bring a sense of relief to market participants, many of whom are struggling to digest the rules and implement systems and processes to remain compliant in time for the deadline.

Such concerns prompted an initial delay of Mifid II by one year, with the original text scheduling a January 3, 2017, go-live date. But despite this, participants are still saying that they will not be ready for the New Year. This applies even to areas such as trade surveillance—a WatersTechnology poll conducted on November 29 during a webinar on Mifid II’s surveillance requirements found that around half of the audience was making good-faith efforts, but did not expect to be in a position to fully comply come January 3.

National regulators, including the Financial Conduct Authority (FCA), have suggested that they are prepared to be lenient with firms that find themselves in breach of the rules, as long as serious efforts are underway to remedy the situation.

While Maijoor says the obligation to comply with Mifid II will begin on January 3, and that “everyone needs to understand” this fact, he is also not expecting regulators to come down hard the day after.

“I don’t think it would be the smartest strategy to set maximum enforcement capacity on non-compliance on the 4th of January,” he says.

The full interview with Steven Maijoor, in which he discusses the possibility of “no-action letter” mechanisms for European regulators, how Brexit has affected Mifid and the wider European regulatory arena, and proposals to relocate clearinghouses of systemic importance to the Eurozone—along with a planned expansion in Esma’s powers and the perennial question of its funding—can be found here and appears in the December print issue of Waters magazine.

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