Before MiFID II and MiFIR become applicable throughout Europe from January 2018, numerous documents for discussion, consultation and comment have been or are expected to be published during the specification and drafting phase.
In our MiFID II Index we organise the flood of MiFID II documents or MiFIR documents and present you an overview of the relevant sources. The regulatory and implementing technical standards of the European Commission (level II), as well as ESMA guidelines and Q&As of ESMA (level III) already published, are matched with the respective articles from MiFID II and MiFIR legal texts. Additionally, we illustrate the current completion status of the MiFID II documents and MiFIR Dokuments from draft to publication in the official gazette.
The regulations of the European directive MiFID II and the European regulation MiFIR, which came into force in 2014, have been officially applicable in all member states since January 3, 2018. The regulations were implemented in German law with the “Second Financial Market Amendment Act” (2. FiMaNoG), which also came into force on January 3, 2018. The aim of the rules is to counter the weaknesses of the European financial market revealed during the financial crisis, thereby ensuring greater stability, transparency and investor protection.
In addition, the European Securities and Markets Authority (ESMA) has published numerous documents for discussion and consultation as well as Q&As, most of which have now been adopted by the European Commission and officially published in the Official Journal of the European Union. These documents are intended to support the institutes in implementing MiFID II/MiFIR in compliance with the rules. Nonetheless, the implementation and the correct regulatory interpretation of the regulations give rise to further points for discussion, which we would like to present in the following.
After the publication of the “Top 5 Reports” in accordance with RTS 28 for the first time on 30.04.2018, the publication of the first “Execution Quality Reports” on 30.06.2018 is another topic that is eagerly awaited, particularly with regard to the evaluability of the data.
Another focus is the monitoring of ESMA for systematic internalisation (SI). This results in the decision who will attain SI status from 01.09.2018 (in addition to the institutes that have already chosen the voluntary SI classification).
There is also a need for discussion on investor protection issues. The implementation of ex-post cost transparency raises questions – for example, which cost blocks can be aggregated or at which exchange rate costs are disclosed in different currencies.
Furthermore, the design of the suitability reports challenges the institutes. It remains unclear to what extent client exploration has to be recorded in the course of a consultancy meeting, on which no direct business deal is concluded. The “validity” of the declaration of suitability in terms of time is also not clearly defined. In practice, many institutions are therefore confronted with the following challenge: “When does a new declaration have to be issued if an order is not placed immediately after the consultation?
Many market participants are waiting for new information regarding “traded on a trading venue” (ToTV). The classification of a financial instrument as ToTV, for example, directly determines the publication obligations within the framework of post-trade transparency. ESMA stated in a statement on 22 May 2017 that the ToTV check should be carried out using the reference data in accordance with Article 27 MiFIR. However, the Approved Publication Arrangements (APAs), who perform the test, do not necessarily proceed according to uniform criteria and whose examination logic thus often remains intransparent. Thus, concretisation of the ToTV status on the part of ESMA seems very likely in the near future.
Finally yet importantly, ESMA does not provide clear information as to when OTC transactions can be regarded as “economically equivalent” (EEOTC definition) to on-venue transactions for commodity derivatives either – the classification remains a risk for all market participants.
In our MiFID II Index, we are going to present you the most relevant sources (as of 11/2018). The regulatory and implementing technical standards of the European Commission (level II) as well as ESMA guidelines, Q&As and opinions (level III) are matched with the respective MiFID II and MiFIR articles (level I). In doing so, this MiFID II Index refers to the latest version of those documents.
Download the MiFID Index II here.