three years of anticipation, we’re now just 93 days away from 1st
November and the implementation of MiFID. Now you would think that
after 1,217 days of thinking about MiFID’s implications and
implementation, that most folks would be ready … pah!
Just last week SunGard’s survey
(13 page pdf), taken at TradeTech conferences and covering over 300
financial institutions, found that half of firms are behind in their
MiFID preparations and many still don’t know what Best Execution is all
about (covered extensively in this blog already).
there’s a really big hole in MiFID that has just been fallen into by
one group of folks who thought they were unaffected by this wonderful
Who is it you ask?
Well, when MiFID was first
discussed, I thought that market-makers – the systematic internalisers
– would be most affected. Then everyone told me that it was the
traditional exchanges that were going to become obsolescent. And
throughout all of this we talked about the restructuring of the
"But what about the buy-side?" some of us said. "Won’t they be affected too?"
Not really they all thought.
18 months ago, the buy-side were pretty dismissive of MiFID and its impact. In a Liquidnet Survey
of the buy-side in November 2005, 82.7% believed the directive would
provide little or no benefit and 43.8% said they will not spend any
money to comply with MiFID.
Well, they obviously ignored the FSA’s CP 06/14, ‘"Implementing MiFID for firms and markets" released in July 2006 (365 days ago) which answered the question "Who’s affected by MiFID?" with the answer:
- retail banks;
- investment banks;
- portfolio managers, excluding managers of collective investment schemes;
- stockbrokers and broker-dealers;
- futures and options firms;
- corporate finance firms;
- wholesale market brokers;
- operators of RMs and MTFs;
- providers of custody services; and
- commodities and venture capital firms.
other words, almost everyone.
The point is that fund managers are all suddenly whingeing about MiFID.
Bit late isn’t it?
Oh, sorry, I just realised I haven’t told you what they’re whingeing about.
they finally woke up to MiFID’s impact when they realised that MiFID
creates an uneven market where fund managers are forced to disclose the
commissions they pay to distributors, but there is no equivalent regime
for competing vehicles, such as structured products and life insurance.
Although structured products are covered by MiFID, they can
be sold direct and so are not affected by MiFID’s inducement clause
whilst life insurance, according to the way most markets have
transposed the Directive, aren’t really subject to MiFID-equivalent
Now, all the leedle fundy wund managers are jumping up and down and screaming and banging on Brussels door.
According to yesterday’s Financial Times
Jean-Baptiste de Franssu, Chief Executive for Continental Europe at
Invesco, said: "There is increasing demand for transparency from the
fund industry even though it is already more transparent than
structured notes and insurance. If there’s a need for more
transparency that’s fine, but it should be across the board."
Marcus Mecklenburg, Head of Policy and Associations at the BVI, the
German industry association, was jumping up and down: "It’s an outrage
that you can do whatever you want within the wrapper of a structured
product. We need to challenge individual regulators and say: ‘Is this
really a reasonable state of affairs?’"
Well guys, you can jump
up and down, stomp around, kick and scream, even hold your breath until
you turn purple, but you’ve had three years to work this out and it’s