Preparing for MAR and MiFID II: Capitalising on the Synergies

Preparing for MAR and MiFID II

Alongside preparation for the Markets in Financial Instruments Directive II (MiFID II), the significant changes to Europe’s market abuse regime are quickly rising to the top of the urgent to-do list for many firms, particularly in light of the 3 July 2016 deadline. With just a few months left on the clock, firms are diverting significant time, energy and resource to preparing for the Market Abuse Regulation (MAR). Taking a smarter and more holistic approach to implementation is key to success and understanding the common elements between MiFID II and MAR in order to capitalise on the synergies between them will save firms from having to make costly adjustments at a later date.

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Most banks, investment management firms and commodities firms have spent the last 12 months working through the potential impacts of MiFID II and planning implementation. However, most MiFID II technical texts are still not finalised and a delay on implementation until 2018 is a virtual certainty. Those hoping for, or indeed banking on, a similar delay to MAR have been sorely disappointed. Regulators are pushing firmly ahead with implementation of MAR by 3 July 2016. The only concession is that certain limited areas which are contingent on MiFID II for definitions, such as provisions relating to Organised Trading Facilities, will lapse alongside the MiFID II delays. Other than these exceptions, it is full steam ahead for MAR.

The overlaps and links between MiFID II and MAR are intentional. Both MiFID II and MAR require considerable change across multiple business functions. Mapping out the requirements between MiFID II and MAR shows a number of significant common impact areas across Front Office, Operations, Compliance, Legal, IT, HR, elements of governance and customer facing functions. Examples of these common areas of impact include:

  • Surveillance: Systems and controls designed to effectively monitor for behaviour which may constitute market abuse and those designed to help monitor for and deliver best execution.
  • Recordkeeping: Large-scale implementation of call recording capabilities, drafting and implementation of record-keeping policies and procedures.
  • Remuneration: Review of remuneration policies, phasing out of remuneration which may cause conflicts of interest.
  • Responsibilities of compliance functions: Comprehensive reviews of compliance function strategy, design of sufficient tools, production of adequate training materials to ensure staff can meet new requirements.

Ideally, an effective regulatory change programme will map out requirements across various inter-related regulatory initiatives including MiFID II, MAR, PRIIPs (Packaged Retail Investment and Insurance-Based Investment Products) and SFTR (Securities Financing Transactions Regulation). There are synergies which need to be identified and addressed systematically in a way which is time and cost effective. Failing to understand these synergies may result in a costly, ineffective and isolated implementation process which firms will have to spend more time and resource on re-visiting in the not so distant future in order to respond to other related regulatory requirements.

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