THETRADETECH DA I LY
he revised Markets in Financial Instru-
ments Directive, or MiFID II to use its
more commonly known name, has been a
long time coming. A decade after the global
credit crisis shook the capital markets to the
core and pushed some of the largest institu-
tions to the very brink of collapse, regulators
have been working flat out to ensure new
rules are brought in to increase investor pro-
tection and market transparency.
And so, after years of blood, sweat and tears
leading up to the introduction of the new
regulatory regime, 3 January came and went
with only the barest of ripples to disturb the
markets. The early days of the new regime
haven’t thrown up the kind of turmoil some
pessimists predicted, so far at least, failing
to stunt activity at major asset management
firms throughout Europe.
“To be honest, it feels like business as usu-
al,” said Christoph Hock, head of multi-asset
trading at Union Investment. “There were not
any major disruptions or a drop in facilitation
of liquidity across all asset classes in the first
two weeks of MiFID II.
“For me, it’s a continuation of recent trends
we’ve seen and after running a multi-asset
trading desk for two years now, we are run-
ning the business the same as we did before.
most noticeable change for McLoughlin has
been around reporting requirements, but
even this hasn’t been too much of a burden to
bear so far.
“The only real change in day-to-day opera-
tions is ensuring we have our approved publi-
cation arrangement (APA) up and open at all
times on our desktops in case there are trades
we need to report ourselves. Even then, there
have so far been only a few cases where we
have had to do this,” he said.
Reporting concerns
Changes to trade and transaction reporting
processes under MiFID II have proven to be
one of the most contentious and complicated
parts of the new regulatory regime, requiring
firms to process vast quantities of new data,
and establish and maintain relationships
which had previously not existed to ensure
reporting runs smoothly.
“Day-to-day there has been a lot of system
checking to make sure they are working as
expected,” said Neil Bond, head of trading
at Ardevora Asset Management. “There are
extra fields we are getting now so we need to
make sure brokers are populating them cor-
rectly, the data is feeding through efficiently
and it is being reported properly. I can’t
48%
38%
2%
Perfect
more to do on implementation, particularly
on reporting.
“A key challenge for firms in implementa-
tion was the expanded transaction reporting
requirements,” he said. “These involved a
step change in both the volume and quality of
data we receive regarding transactions taking
place in the market.
“The FCA, alongside ESMA, undertook
extensive technological work to be ready to
receive, interrogate and ultimately learn from
this dataset. We estimate that under MiFID,
we will capture some 30-35 million transac-
tion reports a day, up from 20 million before
its introduction. There is a determination
on our part to exploit the full possibilities
of these data to support our efforts to deter,
detect and punish market abuse.”
While Bailey warned that the regulator
would not be showing forbearance to firms
that prove incompliant with MiFID II, it’s
clear that the FCA is aware of the scale of the
challenge firms are grappling with, even with
the years-long lead time the industry has had
to prepare.
Since the 3 January implementation date,
the FCA has made several moves to bolster
up its oversight of MiFID II. In mid-February
the regulator launched a request for input
So... how’s it been
so far?
6%
6%
It’s been okay, but we had to work
hard to get to this point
In this context, we don’t need the regulator to
tell us what to do,” he added.
For Matthew McLoughlin, head of trading
at Liontrust Asset Management, it has been a
similar experience to Hock, as he described
the industry’s approach to the new regulatory
landscape as being more cautious, but still
business as usual nonetheless.
He added that volumes were slightly lower
in the first week of implementation, although
there were expectations for this to occur and
has since seen activity pick up again. The
Too early to tell
Not great
imagine that process has gone smoothly for
anyone because we have heard that the test
environments were available very late.”
It’s not just market participants that are
cognisant of the current issues around report-
ing and what needs to be addressed in future.
Speaking at an event held by the Internation-
al Capital Market Association in early March,
chief executive of the Finan cial Conduct
Authority (FCA), Andrew Bailey, said the
effects of MiFID II will only play out in full
over a period of time, and that there was still
MiFID
T
THE OFFICIAL NEWSPAPER OF TRADETECH 2018
I’ve quit my job due to stress
from the industry, looking to review how
technology can help firms to better meet re-
porting requirements and improve the overall
quality of the data submitted, on the back of
its two-week ‘TechSprint’ which resulted
in proof-of-concept which allows reporting
rules to be machine-readable and executable.
First hurdle
MiFID II hit its first major hurdle just one
week into the new regime when the Europe-
an Securities and Markets Authority (ESMA)
Issue 1
TheTradeNews.com
17