It is interesting to think the UK’s Financial Conduct Authority (FCA) planned to start accepting from April applications for licences to operate as an investment firm under a new EU financial regime that was slated to come in in early 2017.
Now the start of the second markets in financial instruments directive (MiFID II) has been postponed to 2018, even if we are still waiting on that to be signed off .
The primary driver cited for postponing the start of the directive was IT infrastructure. Without all the rules finalised, it was impossible for parties to know the exact spec of the technology needed and also have enough time to build it.
In the meantime, we are still waiting on the rules and definitions to be finalised, only some of which will impact IT design. The reality is, more than giving enough time to build IT infrastructure was at issue. Assuming no delay was proposed, energy firms would need to start applying to the likes of the FCA by May or June at the latest, because a perfect application takes six months.
Energy companies might have had to apply despite not knowing the benchmarks that decide if they need to become MiFID licensed. Starting an application only to later revoke to stay in a regulator’s good books is an expensive exercise.
In mid-March the European Commission sent back some of the regulated technical standards to be amended. This, as the European Securities and Markets Authority (ESMA) pointed out, should have happened by December 2015. ESMA itself was granted more time to produce the standards. And the wait for the commission’s delegated acts continues, with mid-April the latest expectation.
All this points to the need for more realistic planning when designing regulation. The sheer weight of MiFID II was a factor in the delays, but that is not unique. And given the change such regulation should have, surely giving market participants more certainty further out is a must. For now, we wait for the delay to be confirmed, rules to be finalised and definitions to be explained.
See the ICIS Regulation Portal for more on this topic.