[ I N- D E P T H | M I F I D I I ]
“ HSBC Global Asset Management has operated itemised research budgets for many years, and thus the process and mechanics for operating detailed budgets was not new to us. However, the changes to how research is provided, consumed and paid for were and continue to be significant,” he says.
“ Possibly second to this in terms of significant change has been the industrialisation of post-trade monitoring of best execution, which in the case of HSBC Global Asset Management means daily monitoring of every single trade.”
Blinkers off While so much of the industry’ s attention has been fixated on MiFID II for the last few years there has clearly been a tremendous amount of effort put into preparations and ongoing compliance, but market participants must be wary not to put all of their regulatory eggs into the MiFID II basket.
“ MiFID II did not exist in isolation, and required any changes be made in parallel with changes for other regulatory and commercial needs,” says HSBC GAM’ s Cohen.“ The fact that the industry as a whole was able to introduce MiFID
II without any major issues is to be commended.”
As such, it’ s worth taking a step back to take a wider view of the numerous forces at work in the markets according to LSE’ s Schwieger:“ I would encourage the market, being six months into the new regulatory regime, to start taking off their‘ MiFID II blinkers’,” he says.
“ It will of course continue to have a significant impact, but MiFID II is not the only influence on the market at the moment; there is the Capital Requirements Regulation( CRR), Central Securities Depositories Regulation( CSDR), Securities Financing Transactions Regulation( SFTR) and the relaxing of the Volker rules to also consider.”
But taking that wider view doesn’ t just mean focusing on Europe or Euro-centric regulation, particularly as the effects of MiFID II become felt across the wide markets.
“ One surprising outcome following the introduction of MiFID II is the speed at which key parts of the reform are going global. Already in areas such as research unbundling and best execution, the requirements of the regulation are becoming global best practice,” says Liquidnet’ s Decuyper.
“ With more and more firms doing business in multiple jurisdictions, this globalisation effect is likely to gather pace, as enhanced transparency becomes a competitive advantage for asset managers to
“ It will take quite some time to gather the necessary data, analyse it, and go through the process to suggest changes to the directive.”
PAUL SINTHUNONT, BUY-SIDE ANALYST, AITE GROUP
offer to all clients, irrespective of their location.”
Looking forward While there has been plenty of introspection as to how the new regime has bedded in so far, it would be unwise not to consider how the regulation will evolve going forward. There are already signs from ESMA that alterations may be made in the near future, with chair Steven Maijoor highlighting that SIs and periodic auctions will be given a close inspection.
As Cohen puts it,“ MiFID II did not end on 3 January 2018”, and
“ One surprising outcome following the introduction of MiFID II is the speed at which key parts of the reform are going global.”
CHARLOTTE DECUYPER, EUROPEAN MARKET STRUCTURE
ANALYST, LIQUIDNET
there is still work ahead, even for those firms that believed themselves ready for the implementation date at the start of the year.
“ Market infrastructure models have evolved and will continue to evolve and recalibrate as further changes are introduced,” he says.“ Market regulators will also quite correctly refine and improve the regulatory framework.”
However, not everyone is expecting significant changes just yet. Aite Group buy-side analyst, Paul Sinthunont, says that ESMA and local national competent authorities( NCAs) are still in the midst of investigating MiFID II compliance and the regulation’ s impact on the market.
“ It will take quite some time to gather the necessary data, analyse it, and go through the process to suggest changes to the directive. For example, the FCA has suggested its focus is on increased monitoring and assessment of compliance for the next two years.”
32 // TheTrade // Autumn 2018