A one-year delay for the implementation of MiFID II is becoming increasingly likely after a group of MEPs confirmed their support for the proposal.
In a letter to Jonathan Hill, European Commissioner for financial services, the MEPs laid out their demands for a deal that would extend the implementation date. They called on the Commission and the European Securities & Markets Authority to do more more on position limits in commodity markets, transparency in bond markets and thresholds for commodity trading rules that are applied to firms whose main business is not trading.
Proposals for a 12-month delay, which would move implementation to January 2018, gathered support earlier this month after Martin Merlin, a director in the European Commission’s financial services department advised the EC’s Economic and Monetary Affairs Committee that it would be the “simplest and most legally sound approach.”
For market participants, a delay will provide much-needed time to develop the myriad of infrastructures required to comply with wide-reaching rules. The regulation, which aims to boost transparency across financial markets, forces the most liquid over the-counter products including bonds, derivatives and structured products onto exchange-like platforms – many of which have not yet been developed.
The delay would also help regulators to address difficulties that have emerged through the rule-writing process as the details of the legislation unveil problems with the Level 1 text, notes Peter Bevan, global head of financial regulation at Linklaters.
“ESMA has acknowledged that the pre-trade transparency provisions don’t work for package transactions, which requires an amendment to the Level 1 text,” said Bevan. “Market participants may wish to propose other fixes to Level 1, for example by responding to the Commission’s call for evidence on the EU regulatory framework for financial services, but don’t expect major changes.
While additional preparation time will come as a relief to market participants, many warn that an extended timeline to January 2018 is still tight considering the amount of work that needs to be done, and the ultimate impact that it will have across banking and investment activities.
“It’s good news, but I’m not sure that anyone is celebrating that fact that we’re just going to wait another year before being hit over the head,” said one regulatory expert at a European house.
