MiFID - It's as easy as 123

Last week I managed to muster up the energy to attend yet another event on MiFID (Markets in Financial Instruments Directive). With the November deadline for MiFID's implementation looming, everyone seems eager to jump aboard the MiFID 'gravy train' as last minute preparations grind into gear.

Last week's event, which was hosted by the MiFID think tank, JWG-IT,had the interesting working title of, "MiFID 123 Go," which could be misinterpreted given that the 70 or so people that turned up for the event were probably hoping to hear something along the lines of,'MiFID, it's as easy as 123."

The 123 was in fact a reference to how many days remaining till the November live date, and given that MiFID is what the industry terms a "principles-based" regulation, PJ DiGiammarino, CEO of JWG-IT, informed the gathered 'hordes' that they could not necessarily rely on the regulators to provide them with much guidance (no surprises there then), and that it would take three to four years before the MiFID transition was completed.

"Regulators are not going to comment in any great detail on what firms are going to do," Di Giammarino stated. "Firms may want a benchmark on best execution, but it is not going to happen."

With that in mind, Di Giammarino kicked the evening off on a 'light' note telling firms how they could "stay out of jail," pointing to a recent example of a major US sell-side firm that was fined $8 million for "failure of price transparency".

DiGiammarino joked that at least with Sarbanes-Oxley, another piece of controversial regulation,it was only the CFO that could go to jail if financial and accounting practices were not compliant. However, with MiFID it is not just one person that could be in the firing line.

It all started to sound like a game of monopoly. 'Do not pass go, go straight to jail,' but perhaps that is an indication of how real MiFID has suddenly become for a number of firms and countries that its seems are ill-prepared and equipped to cope with the all-encompassing MiFID regulation.

Seventy-five percent of EU member countries did not make the 31 January deadline for transposing MiFID into national law, and European Commissioner for Internal Market and Services, Charlie McCreevy has threatened stragglers with "infringement" proceedings.

"US firms are pretty far up the curve and are forcing the buy side along with them," said DiGiammarino. Yet, with different EU member states transposing to MiFID at different times (Sweden in August, Netherlands in November and Spain after November), it could be a potential recipe for disaster.

According to PJ, any big market [like the Netherlands] that waits till the end to transpose, risks creating a "hybrid" environment, which in the event of a bear market, could result in a very "fragmented Europe." He cited the example of Sweden, which provides transaction reporting support for the rest of the Nordic countries. If it does not make the August 2007 transposition date, then there will be repercussions for the wider market.