MiFID Update, David Doyle, july2010


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MiFID Update, David Doyle, july2010

  1. 1. Fixnetix and the London Stock Exchange In association with the MiFID Forum Present: Anticipated Regulatory Changes in Europe: An Introduction Dr David P. Doyle, EU Policy Advisor in Financial Services
  2. 2. Revised MiFID thrust: A Common Rules Book across the EU – and no gaps! • All actors encompassed: RM’s, exchanges, brokers/traders, MTF’s, IS’s, banks… • Wider scope of asset classes: derivatives, commodities, energy trades, equity-like instruments, OTC trades… • Improved quality of post-trade information – standards, clarification of post-trade transparency obligations • Improved timeliness of post-trade information – cost & quality of data consolidation , delays in publication of data, shortening timeline for regular/deferred publication • Consistency of pre-trade transparency rules for RM/MTFs in equity markets across the EU, applicable to all actors in the RM, MTFs and Systematic Internalisers (SIs) and possibly extended to other secondary markets • Level playing field in all sectors and for all actors • “Market regulators should have unlimited access to pre + post-trading information, while data releases to wider market likely to be less onerous”.
  3. 3. EC Review Agenda • Pre-trade transparency for Regulated Markets and MTFs • Regime for Systematic Internalisers - definition and obligations of Sis • Post-trade transparency – improvement of the quality of post-trade information (standards, clarification of post- trade transparency obligations) – improvement of timeliness of post-trade information (shortening of timeline for regular and deferred publications) • Extension of MiFID transparency regime to equity-like Products • Regulatory framework for consolidation of post-trade data – Regime for Approved Publication Arrangements (APAs) – Options for effective consolidation and reduction of cost of data • Regulatory boundaries and requirements – Alignment of MiFID requirements between RMs and MTFs – Regulatory regime for crossing systems under MiFID • MiFID options and discretions
  4. 4. European Commission request for technical advice on certain provisions of the MIFID from CESR by July 2010 – Best Practice and Investor Protection Revised client classification regime distinguishing between the three types of clients: - Retail Clients - Professional Clients - Eligible Counterparties Questions being asked: • Has CESR encountered problems in the provision of investment services to professional clients or eligible counterparties? • Can CESR further distinguish within the current broad categories of clients ("other authorised or regulated financial institutions", "locals", "other institutional investors, public bodies managing public debt ?
  5. 5. Reinforcing rules on Underwriting and Ancillary Services, the processing and transaction processes associated with financial instruments, especially in bonds and shares. Review • The relationship between intermediaries and issuers • The process of issuing and allocating the financial instruments • The organisation of underwriting syndicates • The pricing of financial instruments
  6. 6. Key Issues and Concerns Going Forward – 1 • The need for Alignment between MiFID, Packaged Retail Investment Products (PRIPs), Market Abuse Directive • Existing divergences: ensuring consistency in the application of MiFID across borders – the role of the new Pan-EU regulator - ESMA • Are all actors capable of adapting to a common disclosure regime in Europe? • Timeframe: early 2011 for draft MiFID proposals – too short? • Can market-driven solutions to future challenges work alongside the present regulatory momentum? • How can market-players and regulators keep ahead of technological developments in the market? • Growing powers of the European Parliament: how will MEPs react?
  7. 7. Key Issues and Concerns Going Forward -2 • OTC markets: how far can they be regulated? What are the risks? • High frequency trading and the prospect of “flash crash” – in the scope? • Clearing of OTC derivative trades: will the EU align with the US to avoid regulatory arbitrage? • Should government and municipal entities be included in the scope and treated as “retail clients”?
  8. 8. Likely main regulatory changes • Significant tightening of the MiFID rules on Equity trading • MTFs and RMs treated equally, plus significant new rules on broker crossing/SIs. • Pre and Post trade reporting likely to become faster and having more information included e.g. underlying customer on post trade • Equity market model being used as a template for regulation of other instruments • OTC derivatives market likely to be significantly controlled and clearing introduced • All new changes by Regulation not Directive, greater harmony across the EU • More end customer protection • New Pan European regulators including ESMA and the ESRB