Clock still ticks on MiFID II despite delay

Clock still ticks on MiFID II despite delay

News that ESMA and the European Commission have agreed to a delay the publishing of MiFID II technical standards should not be seen as a sign that the pace of preparation can ease off. The delay, which will see ESMA’s draft technical standards made public in September 2015 instead of July, is to allow time for a legal review so that any concerns can be addressed earlier on.

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The key date of June for sign off of the draft standards by the Board of Supervisors, made up of national authorities, remains. What is unclear is whether publishing of the draft delegated acts from the European Commission will also be delayed.

There is certainly no indication that the January 2017 implementation deadline is under any question, firms will just have less time to be prepared.

Given the wide-ranging scope of MiFID II and, depending on business model, potential impact on a wide range of functions – from front office to the back office to IT, maintaining preparation plans is essential. MiFID project teams should already be established and beginning the gap analysis of what they currently do versus the MiFID II requirements. Firms need to review their current policies and procedures and potentially invest in systems that can meet the MiFID II requirements.

Reviewing operating models now will be key to success

For larger institutions, if they have not already done so, this means they should be currently reviewing their operating models to determine in particular whether:

  • current internal matching systems can become multilateral trading facilities (‘MTFs’) or organised trading facilities (‘OTFs’);
  • they are acting as Systematic Internalisers (‘SIs’) across their equity, fixed income and OTC derivative markets – based on the ‘frequent and systemic’ and ‘substantial’ thresholds set out in the regulatory text. This will be of greater significance for investment firms operating in the fixed income and OTC derivatives markets; and
  • pre-and post-trade reporting models can be extended to capture a wider range of equity, fixed income and derivative financial instruments

Those who are ahead are conducting impact assessments to determine the priorities requiring detailed analysis – this includes timelines, lead times and also high-level budget assessments. They will also be linking analysis to the myriad of current and future regulations including CSDR, EMIR and MAR, by identifying the impact of each of these regulations on different parts of a business and ultimately, ensuring MiFID II analysis is joined up with other regulatory projects.

How they can extend their pre- and post- trade reporting models to capture a wider range of equity, fixed income and derivative financial instruments.

Now is the time to get started if you haven’t already. A number of the leading players have initiated projects and are getting their MiFID programs underway.

How KPMG can help

KPMG member firms have extensive experience in assisting clients with regulatory change analysis and implementation. Within the MiFID II space, KPMG member firms have been working with a number of clients to conduct impact assessments to determine the key focus priorities requiring detailed analysis – this includes timelines, lead times and also high-level budget assessments. KPMG professionals can also help with the myriad of current and future regulations (for example, CSDR, EMIR and MAR) by identifying the impact of each of these regulations on different parts of a business and ultimately, helping to ensure MiFID II analysis is joined up with other regulatory projects.

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