The widely expected delay to the implementation date for the European legislation known as MiFID II came closer to a one-year delay this week.
The European Commission (EC), officially proposing the delay – which must now be approved by national governments – put the one-year extension down to the complex technical infrastructure that needs to be set up for the MiFID II package to work effectively.
Putting this complexity into perspective, it explains that the European Securities and Markets Authority (ESMA) has to collect data from about 300 trading venues on about 15 mn financial instruments. Regulators admitted last year that the necessary IT systems would not be in place by the original implementation date.
In light of these exceptional circumstances and in order to avoid legal uncertainty and potential market disruption, an extension was deemed necessary, explains the EC.
Given the complexity of the technical challenges highlighted by ESMA, it makes sense to extend the deadline for MiFID II, says Jonathan Hill, commissioner for financial services, financial stability and capital markets union, in the press statement. ‘We will therefore give people another year to prepare properly and make the necessary changes to their systems. Meanwhile, we are pressing ahead with the Level II legislation to implement MiFID II and expect to announce those measures shortly.’
A request – led by Germany and the UK – to give countries more time to put the rules on their statute books was rejected by the EC, however. This extension will not have an impact on the timeline for adoption of the Level II implementation measures, it states. The EC will proceed with its adoption irrespective of the new date of entry into application of MiFID II. This will provide legal certainty for the new provisions.
Commenting on the proposal in a post on the Fidessa website, Christian Voigt, senior regulatory adviser at the technology provider, says the delay is a missed opportunity.
While the delay comes as a massive relief to many market participants and the regulators, it is also a missed opportunity, Voigt writes. ‘Brussels opted, again, to define a fixed deadline rather than a relative timeline (12 months after an event, for example).
‘The recitals [text in European law that sets out reasons for the provisions of an act] for the amending directive and regulation contain some far from subtle hints to ESMA’s advice that the new deadline assumes the transpositions [into national law] and the relevant technical standards are delivered by mid-2016,’ he writes. ‘What if that does not happen? Let’s just hope we don’t have to find out.’
