EU MiFID Market-Law Delay Nears as Lawmakers Pledge Backing

  • Parliament informs EU Commission's Hill of stance in letters
  • Implementing rules must be wrapped up swiftly, Ferber says

The European Union moved closer to pushing back the start date of financial-market rules known as MiFID II, as the bloc’s parliament threw its support behind a one-year delay.

The assembly informed the European Commission, the EU’s Brussels-based executive arm, on Friday that it’s “ready to accept” a postponement as long as technical rules needed to implement the law are “swiftly” completed, Markus Ferber, the parliament’s lead lawmaker on the issue, said in a statement. The deferral means the law would enter into force in January 2018.

In a letter sent to Jonathan Hill, the EU’s financial-services chief, parliament told the commission to address its concerns about the proposed technical standards, including on bond-market transparency, “to prevent an objection” by the assembly. Lawmakers seek talks next month on the implementing measures, which are being prepared by the commission and the European Securities and Markets Authority.

“A delay until 2018 will provide regulators and market participants much-needed time to develop the systems they need to comply with the requirements” of the law, said Peter Bevan, global head of financial regulation at law firm Linklaters. “It will also enable regulators and legislators to sort out some of the difficult issues that have arisen as people get stuck into the detail of the legislation.”

IT Systems

The initial push to delay MiFID II, a vast, complex law that affects nearly every financial firm operating in the 28-nation bloc, from giants like Deutsche Bank AG and Goldman Sachs Group Inc. to small hedge funds, came from ESMA. 

Steven Maijoor, who heads the regulator, said there wasn’t enough time for banks and other financial institutions to build necessary data-reporting systems before the original 2017 deadline, especially since regulatory technical standards needed to make the rules work in practice probably won’t be ready until “well into 2016.”

Maijoor called for a “targeted” postponement, “only related to IT systems.” The commission poured cold water on that idea, however. A partial postponement of MiFID II would be “generally not feasible” because of its complexity and scope, according to a commission document prepared for technical meetings.

Position Limits

The law covers everything from bond-price transparency to rules on how investment research is paid for. It’s intended to make EU markets “more efficient, resilient and transparent,” according to the commission. Implementation depends on installing information systems, which in turn can’t be set up until final versions of the rules and technical standards are in place.

In addition to concerns about non-equity transparency rules, the parliament said the commission should make changes to proposed technical standards on position limits and exemptions for trading activities of non-financial companies.

The commission and ESMA “need to come up with a clear road map on the implementation work and especially for setting up the IT systems,” Ferber said.

The commission is currently in discussions on the issue with parliament and the Council of the European Union, which represents EU member states. Both bodies would have to approve a delay.

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