Agreement to revise MiFID only 'start of the process'

Political agreement on revising the European Commission’s Markets in Financial Instruments Directive (MiFID) is only the start of a prolonged process for affected firms, PwC has warned.

The consultancy’s comments come the day the European Commission announced that the European Council, Parliament and the executive branch agreed on a number of revisions to the directive following prolonged negotiations.

The internal markets commissioner Michel Barnier said in a statement that MiFID II would mean trading would need to shift to “multilateral and well-regulated” trading platforms.

“Strict transparency rules will ensure dark trading of shares and other equity instruments that undermine efficient and fair price formation will no longer be allowed," he said. 

Barnier expressed regret the Commission had been unable to win full support for its “ambitious” transparency proposals for bonds and derivatives, but said the changes marked an important step “towards greater transparency in this area”.

The French commissioner, who last year was forced to shelve proposals to impose capital requirements on pension funds through a revised IORP Directive, added: “Today’s agreement also strengthens the existing rules to ensure effective cooperation between authorities and harmonised administrative sanctions in order to detect and deter breaches of MiFID.”

Laura Cox, financial services partner at consultancy PwC, said that while the proposals had taken a long time to agree – the revisions were first tabled by the Commission in October 2011 – it was only the beginning of the process for companies regulated by the directive.

She noted that the achieved consensus allowed the European Securities and Markets Authority (ESMA) to begin the consultation process for the detail involved in implementing MiFID II.

“The EU is coming more in line with the UK on investor protection measures, including a ban on inducements paid to independent financial advisers and an obligation to design investment products to meet the needs of specified groups of clients,” she added.

She said that while much of the focus had been on “a handful of contentious issues”, MiFID II’s enhanced governance requirements would have a much wider impact.

“MiFID II will affect all regulated firms in Europe, so firms need to begin assessing the full operational impact of these changes now,” she said.