By Gary Stone, Chief Strategy Officer for Bloomberg Trading Solutions
With 14 months until the current January 2017 MiFID II implementation deadline looming, the market began to breathe easier when a tweet, followed by speeches by officials, indicated that the European Commission is pushing for a blanket one-year extension to that deadline.
Expectations were tempered the following day when members of the European Parliament
indicated that a delay isn’t a done deal. The discussion around the
implementation date is going to be a fluid situation. However, it is important
that any delay does not impact the delivery of the overriding policy objectives
to further increase market transparency and promote competition in EU markets.
At Bloomberg we fully support these objectives and remain committed to achieving our MiFID II solutions by January 3, 2017. Our perspective, which is informed by our active and constructive engagement with the market on Mifid II, is that an implementation delay needs to focus on extending “crunch time” – the time between final National Competent Authorities (NCA) guidance and the final implementation date.
A sensible delay after national guidance
Currently, July 17, 2016, is the date that the NCAs are required to provide their directive guidance. Thus, it is only on July 18, 2016 that we will know what needs to be done and can finish designing, building and testing compliant systems.
July 18 to January 3, 2017 — that is the “crunch” period where relief is needed.
An extension of this period will provide vendors and investment companies the
necessary time to design, build and adequately test solutions prior to
A simple one-year push that equally pushes out the deadlines for the NCA guidance — and simply moves the “crunch” period of July 2016-January 2017 to July 2017-January 2018 will not help the market.
A phased-in grace period
If an extension cannot be agreed on, then another potential solution to the “crunch” period could be a phased-implementation approach, similar to the implementation of the short-selling regulations a couple of years back and with the Alternative Investment Fund Managers Directive (AIFMD).The deadline could remain at January 3, 2017, with Esma and the NCAs’ layering conformance with a softer compliance phase.
The US has a “No Action” legal structure, but no such vehicle exists in Europe. However, Esma and the NCAs could take the posture during a set period that everyone is mandated to be “live testing” what they have, but no one gets fined because the regulator focus is on working with the market to get it right.
There would be tolerance for technology that may go on and off line during this period. For example, systems miscues might be present in pre-trade and post-trade transparency, as systems get synched up, and any discovery that not everything is being transaction-reported would have a grace period. Of course, that period would need to have an end date when full conformance would be expected.
In our opinion, industry and regulators working together to get the implementation right and to achieve the goals and principles of the regulation is a prudent approach.