[ I N - D E P T H | M I F I D I I ]
“ HSBC Global Asset Management has operated itemised research budgets for many years , and thus the process and mechanics for operating detailed budgets was not new to us . However , the changes to how research is provided , consumed and paid for were and continue to be significant ,” he says .
“ Possibly second to this in terms of significant change has been the industrialisation of post-trade monitoring of best execution , which in the case of HSBC Global Asset Management means daily monitoring of every single trade .”
Blinkers off While so much of the industry ’ s attention has been fixated on MiFID II for the last few years there has clearly been a tremendous amount of effort put into preparations and ongoing compliance , but market participants must be wary not to put all of their regulatory eggs into the MiFID II basket .
“ MiFID II did not exist in isolation , and required any changes be made in parallel with changes for other regulatory and commercial needs ,” says HSBC GAM ’ s Cohen . “ The fact that the industry as a whole was able to introduce MiFID
II without any major issues is to be commended .”
As such , it ’ s worth taking a step back to take a wider view of the numerous forces at work in the markets according to LSE ’ s Schwieger : “ I would encourage the market , being six months into the new regulatory regime , to start taking off their ‘ MiFID II blinkers ’,” he says .
“ It will of course continue to have a significant impact , but MiFID II is not the only influence on the market at the moment ; there is the Capital Requirements Regulation ( CRR ), Central Securities Depositories Regulation ( CSDR ), Securities Financing Transactions Regulation ( SFTR ) and the relaxing of the Volker rules to also consider .”
But taking that wider view doesn ’ t just mean focusing on Europe or Euro-centric regulation , particularly as the effects of MiFID II become felt across the wide markets .
“ One surprising outcome following the introduction of MiFID II is the speed at which key parts of the reform are going global . Already in areas such as research unbundling and best execution , the requirements of the regulation are becoming global best practice ,” says Liquidnet ’ s Decuyper .
“ With more and more firms doing business in multiple jurisdictions , this globalisation effect is likely to gather pace , as enhanced transparency becomes a competitive advantage for asset managers to
“ It will take quite some time to gather the necessary data , analyse it , and go through the process to suggest changes to the directive .”
PAUL SINTHUNONT , BUY-SIDE ANALYST , AITE GROUP
offer to all clients , irrespective of their location .”
Looking forward While there has been plenty of introspection as to how the new regime has bedded in so far , it would be unwise not to consider how the regulation will evolve going forward . There are already signs from ESMA that alterations may be made in the near future , with chair Steven Maijoor highlighting that SIs and periodic auctions will be given a close inspection .
As Cohen puts it , “ MiFID II did not end on 3 January 2018 ”, and
“ One surprising outcome following the introduction of MiFID II is the speed at which key parts of the reform are going global .”
CHARLOTTE DECUYPER , EUROPEAN MARKET STRUCTURE
ANALYST , LIQUIDNET
there is still work ahead , even for those firms that believed themselves ready for the implementation date at the start of the year .
“ Market infrastructure models have evolved and will continue to evolve and recalibrate as further changes are introduced ,” he says . “ Market regulators will also quite correctly refine and improve the regulatory framework .”
However , not everyone is expecting significant changes just yet . Aite Group buy-side analyst , Paul Sinthunont , says that ESMA and local national competent authorities ( NCAs ) are still in the midst of investigating MiFID II compliance and the regulation ’ s impact on the market .
“ It will take quite some time to gather the necessary data , analyse it , and go through the process to suggest changes to the directive . For example , the FCA has suggested its focus is on increased monitoring and assessment of compliance for the next two years .”
32 // TheTrade // Autumn 2018