David Pasley
The new timeline gives firms a realistic chance of implementing this complex regulation on time and in a controlled way, while the recently published series of Regulatory Technical Standards (RTS) bring much needed clarity to allow firms to move forward with planning and execution.
However, a huge effort is still required to face this project, particularly in the many areas where technology changes are needed.
Areas of focus
Firms are facing a considerable challenge in ensuring they have the technological resources to efficiently comply with MiFID II. As a result of the new requirements, many firms will have to consider some or all of the following:
• Strengthening their hardware;
• Updating current software;
• Developing new tools;
• Engaging in new exchanges of data flows with third parties; and
• Increasing their levels of tracking, back-ups and archiving.
These factors can be applied in most cases to several affected areas. There is also a need for systems and processes to be linked and properly integrated to ensure that firms are meeting their obligations for each aspect of each activity they perform, with as little manual intervention as possible.
Alignment across all operations areas will be a necessity and all of the following areas will be affected by the new rules:
• Risk management;
• Compliance;
• Back office operations and reporting;
• Front office – trading/execution/portfolio management;
• Wealth management and relationship management; and
• Marketing/distribution.
A systematic process coupled with a robust technological infrastructure will need to be developed, tested and implemented in order to allow firms to adhere to the myriad of new requirements. It is the realisation of the enormity of this task that has contributed to the one year extension - the key message is: review your implementation priorities but do not take your foot off the accelerator.
What’s next?
ESMA guidelines will continue to be finalised on a topic-by-topic basis until early 2017. In Ireland the CBI has sent transaction reporting questionnaires to affected firms while the Department of Finance has issued a consultation paper on national discretions, demonstrating that MiFID II has moved onto the agenda locally.
The 3rd of January 2018 may sound like it is still a long way off, but given the nature and scale of changes most firms still need to make 2018 really is not that distant. Remaining vigilant toward next steps and keeping up the momentum of implementation efforts will reap rewards in the post-MiFID II world.