With just weeks to go before the January 3 implementation deadline for the EU’s Markets in Financial Instruments Directive II (MiFID II), affected financial institutions are flat out as they attempt to achieve compliance as best they can.

This is a challenge.

MiFID II – considered by some to be the biggest regulatory shake-up of the European trading landscape in a generation – is broad in scope, touching on all aspects of financial services activity as it strives to improve investor protections, promote market transparency and avoid a repetition of the Credit Crisis of a decade ago. The regulation is now widely understood, although the European Securities Market Association (ESMA) even at this late stage continues to tinker with its guidance on minutiae. To date, firms’ preparations have involved creative innovations, as they grapple with the multi-faceted regulation.

Anecdotally, firms report that they expect to be ready in time for the deadline, albeit with significant workarounds that they are likely to revisit later to improve and streamline operations. Firms are finding, however, that the regulators’ intentions – in terms of more prescriptive measures around best execution, trading venues, trade / transaction reporting and other aspects of the trading work flow – are having consequences for market structure, potentially changing the way firms approach their trading business. And while Brexit is adding to general uncertainty about EU regulations, UK practitioners understand the need to achieve MiFID II compliance since the deadline falls well before any exit of the EU can take effect.

A number of key aspects require firms’ attention. These include:

  • Transparency, in terms of pre- and post-trade reporting;
  • Best execution and its implications for order and execution management systems, smart order routers (SORs) and record-keeping;
  • Algorithmic trading and monitoring;
  • Instrument and client definition management;
  • Time synchronization and high frequency trading classification;
  • Systematic internalization;
  • Risk compliance and checks.

These and other requirements introduced by MiFID II are impacting how firms operate after the January 3 deadline. Specific provisions – like the new volume caps and high-frequency trading (HFT) classification – as well as broader concepts like new venue types across all asset classes – will affect how firms approach macro issues like staffing and more micro issues like the operational requirements of the OMS and EMS platforms. For now, firms should focus their attention on the January 3, 2018, implementation date.

A few pointers:

  • There is no more time for strategic discussion – immediate action is the only option.
  • Consolidate where possible – it will be difficult to maintain a complex mix of vendor solutions and in-house developed applications.
  • Review the business model – identify strengths and weaknesses and look for potential outsourcing or use of external brokers for certain markets and/or asset classes.
  • Ensure reference data quality – it will affect trading business significantly under the new regime. Oh, and don’t expect to take too much time off for the holiday season. 

Download the white paper

MiFID II: Time for Action.

Related content

TradeTech Europe 2020

Trade Tech has gone virtual so you can continue to learn from and network with your leading buy...

Read more
Balancing a new normal thumbnail

Accelerating the new way of working

Like most organizations during this pandemic, Itiviti’s main priorities focused on the health and safety of our employees...

Read more

The 18th Asia Pacific Trading Summit, 20 October, JW Marriott Hong Kong

Join Itiviti at the 18th Asia Pacific Trading Summit. This one-day, electronic trading event is known to bring...

Read more
handshake

Itiviti and Diginex partner to bring digital assets to institutional investors

The institutionalization of digital assets has taken a major step forward with a new partnership between Itiviti and...

Read more
Website thumbnail

In conversation with Diginex

We are glad to introduce our new podcast series “In conversation with” where Itiviti subject matter experts invite...

Read more

Webinar: NYFIX Matching for post-trade affirmation AMER

For the past two decades, the post-trade affirmation process was done either manually or through the Omgeo suite...

Read more
Middleware thumbnail

What the heck is “middleware” anyway?

Middleware is a term often thrown around when talking about technology, but what exactly does it mean? There...

Read more

Webinar: NYFIX Matching for post-trade affirmation EMEA

For the past two decades, the post-trade affirmation process was done either manually or through the OMGEO suite...

Read more
Website thumbnail gavin qa

Inside Customer Success at Itiviti with Gavin Welsh

Great companies have great leaders and at Itiviti we are no different. We’ve conducted a series of interviews...

Read more

Written by

Johannes Frey-Skött, Vice President Engineering Agency Trading Apps, Itiviti

Share this insight