S/ What is MiFid II ?

20140426_FND001_0MiFid II is a major set of reforms set agreed on last January* on which the expectance is to revolutionize the European market place as we know it.

Based upon MiFiD I which was set in 2004, MiFiD II should be incorporated within 2015-16 and aims to be much more ambitious set of reforms than his late brother. MiFiD II mostly affects banks, broker dealers and trading venues.
Much has happened since the 2007-8 Financial Crisis, new technology emerged such as High Frequency Trading, dark pool transactions have gained in size, MTFs (multilateral trading facilities) have soared and Compliance related jobs increased.

 
Since MiFid I was implemented in 2007 this lead to new “winners” and “losers” and leaves us to speculate who will benefit from the new set of reforms of MiFid II. For example the City came out stronger from MiFid I while they were very critical of these reforms but many people lost their jobs as with fixed-income traders.
But who will be the next “winners” and “losers” ? As the financial crisis accelerated and influence the development of MiFiD II the fear may come with an over-emotional and over-regulationed  implementation of reforms.
The new regulation will likely increase in the protection for investors, increase of  internal control/governance, increase of external control/governance, increase in market transparency, increase of process and control systems and evolving a new market structure, basically a lot more paperwork.
But in fine print you see that there will be:
·        New limitations in certain derivatives
·        Critical information sent to governmental agencies (algorithms investment will now be need clearance).
·        More administrative and paperwork for investors protection (enhanced information on trades, more detailed periodical assessments,…)
·        Increase compliance administration and authority for internal controls (deviation of compliance officers recommendations will now be recorded)
·        More transparency for block trades in dark pools  (difficult to do as of the very nature of dark pools)
·        Third countries review access (with an aim of access homogenization)
With the current regulatory aggressive atmosphere requirement such as  FTT, MiFiD II, EMIR, DF-OTC, Volker, FATCA and AML banks have increased the costs to meet regulatory demand and will going forward have increased going charges.
Furthermore more restrictive liquidity requirements being set in place from Basel III to CRD IV that will cause smaller banks to simply start drowning in administrative costs (big banks and the other hand have the resources to adapt).
But will future economic crashes be avoidable after such measures or are we simply trying to fill one hole and while creating a new one? Time will tell.

*by the trio of “The European Commision”,”The European Parlement”, “The Council of European Union”

 

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