The legislative frameworks of both MAR and MiFID II are in effect (i e decided upon and published in the EU’s Official Journal).
|MAD II||Jul 3rd 2016||MAR 596/2014||CSMAD 2014/57/EU|
|MiFID II||Jan 3rd 2018||MiFIR 600/2014||MiFID II 2014/65/EU|
MAR/CSMAD legislation process
The MAR provisions set out in the Regulation will apply from July 3rd 2016, with the exceptions of some sections that are dependent upon MiFID II (e g OTFs).
On the same date, the Directive (CSMAD) should be transposed to national law, and the current Directive 6/EU/2003 will be repealed. The Regulation does not need to be transposed, only “translated”, since it applies all over EU with direct effect. However, the UK has decided to opt out (they can opt-in on a case-by-case basis). The Swedish FSA (“Finansinspektionen”) has informed that the Swedish Government will not be able to transpose the Directive into Swedish law by that date. A target date for the Swedish transposition is set to Feb 1st 2017.
Prevent and detect market abuse and orders that may cause disruptions on the market
Sell-side firms have already since some time been adressing requirements concerning the monitoring of order flow. The requirements on a sell-side firm are not only driven by regulatory minimum requirements. As a comparison, Best Execution requirements today do not constitute the minimum level of which sell-side firms operates their execution. The requirements (on the best possible result when executing client orders) are much higher in practice. This also true for systems and processes aimed at preventing and detecting market abuse (note: there is already a Market Abuse Directive in application today, together with ESMA Guidelines).
In practice, for firms with a large algorithmic order flow, the requirements are much higher than the minimum requirements stipulated by the legislation. Some examples:
Economies of scope and scale
MAR and MiFID II will increase the requirements, both from a hygiene perspective (compliance) and from a competitive perspective (trading-performance). MAR is the most urgent from a timing perspective, but with MiFID II on the horizon the sell-side must also weigh in Best Execution, TCA and algo monitoring in their technology investment decision.
Choosing the best way forward
Obviously, there are a number of possible approaches a firm can have to the upcoming regulatory changes. Some firms will prefer to wait and see; others will want to make sure they have all bases covered. The more common approaches include:
Clearly, we have reached a point where banks and investment firms have to make a choice, and the time to act is now.
FIX Infrastructure It goes without saying that it’s imperative for trading technologists to thoroughly test their systems before the put them in a production environment. Clearly, building a market-beating trading platform requires a high level of uptime and a propensity for failure that’s as close to zero as possible. And for years technologists have used a range […] November 5, 2018
Risk & Compliance Nine months into the MiFID II era, it’s time to look beyond the compliance issues and start considering the business opportunities presented to firms operating under the Systematic Internaliser regime. With the support from a value-adding regulatory solution, SI status can be used for competitive advantage, suggests Jonas Lindqvist, Principal, Trading and Trade Execution, Itiviti. […] October 9, 2018
Risk & Compliance Trading firms across the board are discovering that operational and regulatory requirements increasingly demand a consistent approach to connectivity, messaging and data management. To industrialize their response to these emerging requirements – to address the challenges in a streamlined, consistent and scalable way – firms need to put in place a centralized connectivity and messaging […] September 25, 2018
Risk & Compliance MiFID II marked a sea change in the approach to the handling of order, trade and transaction data. Rigorous new requirements around data capture, analysis, reporting and record-keeping made the communication of data a central theme in ensuring trading systems were MiFID II compliant, and connectivity – between external and internal systems, databases and processors […] August 14, 2018
By submitting this form, you acknowledge that data collected by us will be handled in accordance with our Privacy Notice.