Thursday 26 July 2007

A double espresso in the MiFID Starbucks!!!

Just to wake you up!

Time goes by and yet MiFID still refuses to go away (By the way, do you realise there are now less than 100 calendar days to 1 November ?). There are urban legends that are still doing the rounds of city institutions:

· “Professional Clients are exempt from Best Execution”,

· “xyz has a standard MiFID compliance package that will be available in October”,

· “We are not really affected by MiFID, we are the branch of a non-EU institutions and although we do operate investment business from London MiFID is not really our problem”

· “MiFID is just for exchange traded instruments” was still heard last week (although I admit it was the only time in the past four weeks)

… and the award definitely goes to

· “Nobody in *** (put a firm type here) can really comply with MiFID and therefore we are not doing anything yet until we know where the wind blows.

Why is it that three months from a major regulatory deadline (MiFID) and five months from another deadline (CRD) very few compliance officers are worried or even afraid of losing their jobs? What about IT infrastructure? And how will every client facing person will behave if the in-house ‘MiFID guru’ does not share his/her knowledge?

First wake up call: It does not matter what happens to other jurisdictions within the MiFID area. If you are based in the UK, MiFID is the law of the land! So you have to get on with it (amazing how the recent Sungard survey fails to point that out when they ask the relevant question).

Second wake up call: All the relevant authorities are sending out clear messages that there will be no extension of the deadline. The messages are getting clearer and clearer and a lot of jurisdictions are planning summer blitzes to transpose by the end of September (whether they will all achieve it is another matter, but then the first wake up call still applies)

Third wake up call: It is not just MiFID, s****** ! CRD (Basel 2) has to be implemented as well, then you have AML rules, etc., etc… You have better take a comprehensive look at the whole regulatory environment if you do not want to run the risk of starting all over again.

And yet there are still things that need clarification and even more things where confusion reigns due to misunderstandings of clear rules. For instance, market making will change and the role of a systematic internaliser should be examined very closely (some institutions out there may actually have to become one if they want to continue market making), however the buy side has no interest in internalisation (another question that the Sungard survey gets wrong).

All of this should not be an excuse for slow action and lack of preparation. The two surveys recently published by Sungard and Thompson/IFR agree that institutions are not ready (although the population of respondents is not really huge. Sungard claims 300 respondents from Financial Institutions, Vendors and Consultants based in the EU, America, Asia – hardly a cohesive sample - and Thompson/IFR had less than 100 respondents, although from Tier 1 and Tier 2 institutions with the majority based in the UK - a more consistent population of respondents).

One thing is clear. Larger firms are getting ready. Smaller firms need to get a move on. The risk is not decreased competitiveness in the market; the risk is not being able to operate in the market at all. And whose head will roll when that happens?

1 comment:

Anonymous said...

Take a look to this multilingual glossary which specialises on new MiFID related terminology: http://www.reglo.co.uk/results.php?code=768&mode=trad&lang_id=10