so it’s not quite a month since MiFID came into force on 1st November,
and I got a flurry of emails over a statement made by one of the
research firms* that, "It’s been remarkably quiet. I don’t think
there’ve been any big issues … I think everyone can be pleased that
Now, to be honest and fair, I think this
firm is trying to indicate that the big explosion, the big bang, the
major revolution has not happened. So I’ll agree with that. Most of
us refer to MiFID as the long moan rather than the big bang.
As a long moan though, a lot has happened.
have many new market players in trading (Chi-x, Equiduct, Smartpool,
PlusMarkets, Turquoise …) and trade reporting (Omgeo, Boat, ICMA’s
TRAX2, as well as new systems from LSE, Deutsche Bourse and Reuters).
We have had issues with LSE’s new systems reached breaking point
shortly after MiFID’s launch. That was a shock and, in part, relates
to the fact that trade reporting issues, which were never fully
resolved, are creating duplicate reports and false flags. The result
is that there is confusion about what was traded with whom and where.
As is the fact that there are now over 190 execution venues trading
across Europe creating a data bubble.
We also had the Property
Investment Market suspending business because they could not get a
license from the FSA as an MTF, as reported by John Cant the other day.
don’t think "everyone can be pleased that they’ve complied" is quite
true however, as I hear lots of firms are non-compliant, including some
of those involved in the big projects.
For example, the fact
that the firms publish their “best price” but that those prices aren’t
firm is, in my view, non-compliance. These prices are not firm as, by
the time the retail investor tries to get in there, the price has
changed. This price change happens to be due to delays between pre-
and post- trade reporting systems. The delay allows the directly
connected professional investor to get best price, but retail investors
connected to retail service providers do not.
Now these delays
may be purposefully built into those systems of course, and I am told
that this is ok because the FSA has ruled that such prices are allowed
to pass through as the “negotiated price”, so that’s ok.
To me, this is non-compliance.
the fact that no-one has been taken to task yet is primarily because
no-one has been tested for compliance yet. The FSA and European
Commission are instead watching very carefully to see how firms are
behaving and which are misbehaving. Those caught in flagrant
disregard, watch out. Around April 1st, you will be made to look like
fools for your in flagrante delicto disregard.
example, I just attended a nice presentation this morning from the
European Commission giving an update on MiFID. Their comments included:
have continued infringement proceedings against those who have failed
to transpose which currently focuses upon four member states: Czech
Republic, Spain, Hungary and Poland. Spain is voting today to
transpose level 1 of MiFID by mid-December, and Hungary did so last
week. But we will be naming and shaming those countries that fail to
implement and the Commissioner is regularly on the telephone to their
finance ministers as a result.”
In this update, they also
mentioned that in Q1 2008 the Commission will make rulings around bond
markets and other non-equities markets and their coverage under MiFID,
and Q4 2008 a statement on commodities markets.
will be updating transparency rules to cover delay tables and the
availability of execution data quality, as well as bringing back
telephone recording as a requirement of reconstituting trades.
Watch this space. MiFID is by far and away unfinished. More to come later.
* one of my friends has it in for this firm so I promised not to mention that it was Gartner again.