The Markets in Financial Instruments Directive (MiFID) has been around since its first iteration in 2007 and much of current UK regulation comes from it. It provides the framework legislation for how investment services and financial markets operate within the European Union (EU) and is pretty much unavoidable for anyone in financial services.
MiFID II is the latest tranche of legislation to be actioned by 3rd January 2018, and I’ll be touring the country in September with Nucleus who will also be releasing a paper I’ve written on the subject.
There are some important differences, but what’s striking is how much trivial, almost pointless, change is also brought in by MiFID II.
EU legislation is implemented by both Directives and Regulation. Regulation is instantly binding and must be applied verbatim without any requirement for HMT or FCA to redraft their rules, however Directives can be implemented with some discretion by each member state.
MiFID II creates an absurd situation whereby some of the new regulation brought in is so close to existing UK regulation and guidance, without being identical, that we have two sets of similar but not identical rules covering MiFID and non-MiFID products for complaints, for example.
‘World class regulator’
Shake your head as much as you like, the FCA is regarded as the planet’s best regulator, and other countries take their lead from them. It’s likely that the FCA had a big say in the principles behind MiFID II, and being handed back a similar set of rules to implement to those already in place could be a frustrating, if flattering, consequence of that.
Could they be victims of their own success?
As part of any future trade deal there is the distinct possibility that the UK would need to demonstrate ‘equivalence’, a legal concept that facilitates cross border trading between markets that choose to recognise one another’s standards. This is a critical issue for UK financial services and not without risk if used. A declaration of equivalence can be revoked with just 30 days’ notice under EU legislation.
Is MiFID II implementation a prototype for a future definition of equivalence?
We’ll never know, but it would explain a lot. This could be a sign of things to come.