Several websites have a sort of MiFID countdown. There are 252 days to November 1st, and that includes weekends, holidays, etc. Not a long time isn't it ?
So what do you do if you have not started yet ?
First of all do not sit hoping to find some pre-packaged, pre-prepared standard implementation solution. You may possibly solve the IT side of MiFID in this way but that would not solve the policies and procedures side and what's more there still be the need to integrate the rest of your IT system. You need to act and act now, so where do you start ?
The first thing to do is assess the impact of MiFID for your organisation.
Look at your organisation chart, look at what you do (traded product, advisory services, research advice, relationship to clients, etc.) and most of all look at what else will be indirectly affected by the changes brought in to become MiFID compliant. Areas likely to be affected are market data, reference data, audit trail, client reporting, financial reporting and you also will need to review all the literature you distribute to clients and the relevant contractual documentation (from standard terms and conditions to clients agreement, etc.). Bear in mind that best execution means more than best value and that you will have the possibility of using more than one trading venue. Last but not least consider your other regulatory requirements, MiFID is not going to exist in isolation. Bear in mind that during the transition to full compliance and for some time after that your Operational Risk will increase and that will affect Basel II, also MiFID will have an impact on your audit trail and therefore if you have to be Sarbanes-Oxley compliant you have to look at that as well. Also MiFID has introduced changes in the Conduct of Business rules, make sure you have considered those changes as wel
Second - Gap Analysis
You have your scope, you have the list of policies and procedures to define or revise, you know what you have to do with IT. You now need to define what you have to do to get there and also what are the dependencies and how many work streams you need to create.
Third - Classify your client, define your best execution policy and make sure you have a proactive agreements from your clients, define your other new policies and procedures
Fourth Run two parallel (but co-ordinated) projects - IT and new policies and procedures. This is really important. If you read this from the UK you need to make sure that your policies and procedures are implemented by everybody in your organisation.
Make sure you have expert advice at hand, you will need legal advice in your communication with clients and supplier and whenever there is the need to interpret vague points in the directive. Your new audit trail also needs to be reviewed by an expert especially if you have to be SOX compliance as well.
This has probably not helped very much, but there are only about 180 working days to go. Do not think that MiFID is just for equity, if you deal in any of the following (and this is a summarised list) you have to be MiFID compliant:
transferable securities, money market instruments, units in collective investment undertakings, options, futures, swaps, forward rate agreements and any other derivative contracts relating to securities, currencies interest rates or yields, derivative instruments for the transfer of credit risk, financial contract for differences [N.B. This list is not exhaustive]
Last January 65% of compliance officer questioned in the City thought that MiFID only affected institutions that deal in equity, that is obviously wrong. With about 180 working days to go to November 1st the time for action is now. Unfortunately a lot of smaller companies are in wait and see mode, how do you think we can better educate our peers ?
So what do you do if you have not started yet ?
First of all do not sit hoping to find some pre-packaged, pre-prepared standard implementation solution. You may possibly solve the IT side of MiFID in this way but that would not solve the policies and procedures side and what's more there still be the need to integrate the rest of your IT system. You need to act and act now, so where do you start ?
The first thing to do is assess the impact of MiFID for your organisation.
Look at your organisation chart, look at what you do (traded product, advisory services, research advice, relationship to clients, etc.) and most of all look at what else will be indirectly affected by the changes brought in to become MiFID compliant. Areas likely to be affected are market data, reference data, audit trail, client reporting, financial reporting and you also will need to review all the literature you distribute to clients and the relevant contractual documentation (from standard terms and conditions to clients agreement, etc.). Bear in mind that best execution means more than best value and that you will have the possibility of using more than one trading venue. Last but not least consider your other regulatory requirements, MiFID is not going to exist in isolation. Bear in mind that during the transition to full compliance and for some time after that your Operational Risk will increase and that will affect Basel II, also MiFID will have an impact on your audit trail and therefore if you have to be Sarbanes-Oxley compliant you have to look at that as well. Also MiFID has introduced changes in the Conduct of Business rules, make sure you have considered those changes as wel
Second - Gap Analysis
You have your scope, you have the list of policies and procedures to define or revise, you know what you have to do with IT. You now need to define what you have to do to get there and also what are the dependencies and how many work streams you need to create.
Third - Classify your client, define your best execution policy and make sure you have a proactive agreements from your clients, define your other new policies and procedures
Fourth Run two parallel (but co-ordinated) projects - IT and new policies and procedures. This is really important. If you read this from the UK you need to make sure that your policies and procedures are implemented by everybody in your organisation.
Make sure you have expert advice at hand, you will need legal advice in your communication with clients and supplier and whenever there is the need to interpret vague points in the directive. Your new audit trail also needs to be reviewed by an expert especially if you have to be SOX compliance as well.
This has probably not helped very much, but there are only about 180 working days to go. Do not think that MiFID is just for equity, if you deal in any of the following (and this is a summarised list) you have to be MiFID compliant:
transferable securities, money market instruments, units in collective investment undertakings, options, futures, swaps, forward rate agreements and any other derivative contracts relating to securities, currencies interest rates or yields, derivative instruments for the transfer of credit risk, financial contract for differences [N.B. This list is not exhaustive]
Last January 65% of compliance officer questioned in the City thought that MiFID only affected institutions that deal in equity, that is obviously wrong. With about 180 working days to go to November 1st the time for action is now. Unfortunately a lot of smaller companies are in wait and see mode, how do you think we can better educate our peers ?
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