Thursday, January 25, 2007

Alice in Wonderland

The 'Day of the MiFID' may be looming, but there is still considerable uncertainty about the final shape of the regulation, particularly in terms of what constitutes 'best execution' and how many member states and firms will be ready for "transposition" to MiFID from November this year.

At Finexpo in London on Wednesday, Anthony Belchambers, chairman, Futures and Options Association and MiFID Connect,said that "Alice in Wonderland" views existed in the marketplace about firms' and member states' ability to comply with MiFID.

The general perception is that three of four European member states including the UK and France, will be ready for transposition to MiFID by November. However, Belchambers believes that member states will be reluctant to face the umbrage of the European Commission for not meeting the deadline, although he adds, it is unlikely that any action taken by the Commission will end up in court. "Most member states will be careful about taking enforcement proceedings," he says.

Once MiFID comes into effect from November, Investment Services Directive (ISD was the predecessor to MiFID) passports will be switched off. But what will happen in those member states that have not transposed to MiFID by the November deadline, Belchambers asks? Whilst an ISD passport covers a number of areas included under MiFID,there are aspects unique to MiFID which will not be covered by an ISD passport.

MiFID think tanks like JWG-IT, which are helping firms' navigate the murky waters of MiFID, have said that firms and member states' preparations for MiFID are not be helped by CESR (Committee of European Securities Regulators) missing five consultation deadlines for issuing its recommendations on what constitutes best execution under MiFID. "The 'known unknowns' are not going away," JWG-IT writes in its latest newsletter.

Although the major sell-side firms with strong algorithmic trading capabilities believe they already provide best execution of equity trades, there is still uncertainty as to how the regulators will treat the best execution requirement under MiFID. Will different member states say different things about it? Will best execution apply to every product in every market or should it only apply to the plain vanilla markets where it is easier to benchmark price?


Anonymous said...

Just curious how you choose the topics that you write about? Is it whatever you feel like for that day or do you have a set schedule of stories that you cover?

FinancialTech Insider said...

It depends on what is happening and whether it arouses my interest. It is a bit random, but the general overarching theme is technology or issues pertaining to business solutions in the financial sector.