March 2018: Regulatory Watchdogs Show Their Teeth

After some questioned ESMA's resolve, the regulator is stepping up its enforcement efforts. Max reviews how ESMA wants market participants to know that its bite can be worse than its bark.


In the run-up to the implementation of the Mifid II regulation, lawmakers took great pains to stress that they wouldn’t make an example of firms that weren’t fully compliant on day one of the new regime, but would give them some leeway, provided they had made a demonstrable effort to comply. As the same time, they warned that they wouldn’t tolerate non-compliance from firms that made no effort.

Though some doubted the European Securities and Markets Authority’s (Esma’s) commitment to enforcing its own deadlines, having already delayed Mifid II for one year prior to its eventual go-live date, and also having more recently granted a six-month grace period for compliance with Mifid IIs Legal Entity Identifier (LEI) requirements for firms unable to comply in time, Esma is already starting to demonstrate that it’s not just all bark and no bite.

For example, Esma has said it will investigate some Approved Publication Arrangements (APAs)—the bodies designated to provide trade reporting for compliance with Mifid II’s transparency requirements—after lawyers and one of Mifid’s architects warned that APAs were not adhering to the spirit, and possibly even the letter, of the law.

On another transparency issue (though not Mifid-related) Esma is also looking into how credit rating agencies set their fees, after years of complaints by banks and investment firms forced to buy ratings to support their responsibilities to investors that the fees are too high and subject to increases without any justification.

And while we’ve made a big deal in these pages about firms not being ready for Mifid II and the six-month LEI grace period, sometimes regulators need a break, too: Esma itself has also required a grace period for another data-related regulatory issue, delaying the implementation of the double volume cap on dark pool trading—a calculation that determines the levels of acceptable trading activity off lit venues, and suspends trading in securities that exceed strict limits—until it had a sufficiently complete and accurate 12-month dataset on which to base its calculations.

The moral of all this? Data doesn’t discriminate, and it doesn’t do you any favors. Well-managed data is a rising tide that lifts all boats, while poor-quality data has a negative impact on all parties associated with it.

Data is the fuel not just for trading, but also for regulatory compliance. Take care of your data, and compliance will take care of itself. Take your data for granted, and you might just feel those teeth. 

  • LinkedIn  
  • Save this article
  • Print this page  

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact [email protected] or view our subscription options here:

You are currently unable to copy this content. Please contact [email protected] to find out more.

You need to sign in to use this feature. If you don’t have a WatersTechnology account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here: