Updated: Commission proposes one-year delay to MiFID II

Energy traders look set to get more time to prepare for new EU financial rules, after the European Commission officially proposed delaying the implementation of the second Markets in Financial Instruments Directive (MiFID II) by one year to 3 January 2018 on Wednesday.

EU member states and the EU Parliament need to approve the delay, but both have indicated their willingness to accept a delay already.

The delay to implementing the updated EU financial rules is because of the almost impossible task for various parties to build the necessary IT infrastructure for it. The technical rules have not been finalised yet, which means the work to build the necessary IT systems cannot be fully known at this stage.

The commission first mooted publicly delaying implementation back in November in the EU Parliament (see EDEM and ESGM 16 November 2015). It has been unclear since then if the implementation of all of the directive or certain parts would be delayed.

The commission said the delay will not impact the adoption of various second level rules for the directive, although the timetable for these has slipped several times already.

The European Securities and Markets Authority (ESMA) submitted rules to the commission for the directive back in September. The rules include the thresholds or calculations energy firms will need to conduct to decide if they are in or out of the directive and apply for an investment firm licence.

The commission can approve, amend or reject ESMA’s rules, known as regulated technical standards.

The EU executive also needs to produce its own delegated acts. These will include the definition of what is physically-settled power and gas forward. Any trades considered derivatives will count towards the thresholds for the in/out tests, and will need to be reported under other EU financial legislation.

Despite the delay, countries will not be given any more time to transpose the directive into national law, which still has to happen by 3 July. This will cause concern for some member states.

MiFID II has the potential to significantly alter European power and gas markets, because companies regulated under it will need to operate more like banks. fionn.oraghallaigh@icis.com