Marking Time on Mifid II

The last few months have been pretty significant, as far as regulatory reform goes. In the US, we've seen Title VII provisions of the Dodd-Frank Act finalized, particularly around the operation of swap execution facilities (SEFs) and the process by which instruments are made available to trade on SEFs. Now, over the past few days in the EU, we've had various reports that an agreement on the Markets in Financial Instruments Directive review (Mifid II) is being forced through.

There are various reasons for this, of course. The EU is noticeably lagging behind the US in terms of completing its rulemaking, despite a strong start. The Irish presidency, too, arguably one of the better-placed nations to oversee the reform of capital markets, is coming to the end of its term, and Dublin is keen to see it finished before the lead role passes to Lithuania in July. From the industry, too, intense pressure is being seen on all sides to get going.

Fall Agreement
Oh how we chuckled at TradeTech in London this year, when a representative from the European Commission said, on the record, that Europe was aiming for a fall agreement. Everyone I spoke to afterwards, myself included, smiled and raised an eyebrow before saying, no, it couldn't possibly be that quick. Nothing in Brussels is that quick.

Apparently not! According to the FT, Bloomberg and Reuters, who all cite sources (official confirmation still isn't quite there) close to the discussions, the format is set. It faces opposition in the European Parliament, though, particularly over what will be included in the new organized trading facility (OTF) regime - the continental cousin of the SEF. Parliament is, reportedly, staunchly opposed to the inclusion of equities as an asset class which will fall under OTF purview, saying that it will inhibit small and mid-cap companies when it comes to raising capital. Others want equities involved.

Other points of contention include access to clearing houses, of course (although the European Market Infrastructure Regulation states, quite clearly, the open access policies for clearing houses), and London is concerned about the continuation of its role as the leading financial center in Europe. A recent agreement, also reported by the FT, limits the ability of the European Securities and Markets Authority (ESMA), Europe's top cop agency, to impose controls on London by saying that it can't unduly prejudice the ability of a center to offer itself up as a financial services hub.

Oh how we chuckled at TradeTech in London this year, when a representative from the European Commission said, on the record, that Europe was aiming for a fall agreement.

On and On
All of this is still up in the air, given the trialogue law-making process of the EU. But it seems that, suddenly, Europe is waking up and getting on with things, after becoming bogged down in its own labyrinthine processes and bureaucracy, and the suffocating influence of lobbyists, for years.