Despite past concerns and some delays, legislators, regulators and experts were positive about the first week since the entry into force of the Markets in Financial Instruments Directive on 3 January, seen as the biggest reform of the financial sector since the 2007-2008 crisis.
“I was very impressed that all the systems were stable on 3 January,” Markus Ferber, the European Parliament’s rapporteur on the dossier, told EURACTIV.com.
The German MEP (CSU) added that he was “really satisfied that everyone was well-prepared” despite the many requirements that had to be implemented.
The European Securities and Markets Authority (ESMA) responsible for drafting technical details to be implemented by the financial players was also happy.
“Overall, everything went relatively smoothly,” a spokesperson said.
MiFID II started its legislative process eight years ago. It aims at offering greater protection for investors and bringing more transparency when trading all types of asset, including equities, exchange traded funds and foreign exchange.
But ESMA was forced to delay this week the implementation of part of the rules that would have excluded equities being traded in ‘dark pools’, because many trading venues failed to provide complete data on time.
ESMA announced the postponement for several weeks of the publication of the data on the double volume cap (DVC) that would have led to suspensions related to dark trading.
Dark pools are private platforms used mainly by institutional investors to trade large numbers of assets without revealing their intentions to other players.
This delay was the result of the insufficient information provided by the trading venues. But for Nicolas Véron, senior fellow at Bruegel, ESMA also has some issues to address.
“Sadly, a lot of the guidance provided by ESMA [for the implementation of MiFID] came too late as of what would have been desirable for the market participants,” he said.
Still, he considered that it was “good news” that no major problems were reported, despite the massive overhaul brought by the new set of rules and the concerns voiced on the eve of the implementation day.
Banks warned that many traders still needed to acquire the new Legal Entity Identifier (LEI), the personal code required to trade. ESMA agreed to pospone the enforcement of this obligation that could have led to blocking the operations of hundreds of traders.
The new framework was already postponed by one year.
The European Banking Federation has not received any negative feedback from their members over the past days, sources from the institution confirmed.
Ferber explained that the postponement of LEI does not represent a “problem” because many of the products are not traded regularly.
He explained that the European Parliament and himself had applied “a lot of pressure to bring in short-term solutions”, so these products could be traded, and as a result there is no ban as some market players had warned.
“I hope that issue has been solved, but it could have been solved even earlier,” he commented.
For Véron, the main problem is that the guidance for MiFID II came too late, partly because ESMA is understaffed.
He also considered that “there is a lot of room for improving the consultation process” with market participants.
ESMA officials highlighted in the past the issue of resources to the MEPs. But a spokesperson refused to comment on whether the preparatory work for the implementation of MiFID would have been better off with additional staff.
MiFID came primarily as a response to the lack of transparency and information provided to customers that contributed to the financial crisis in 2007.
“Customers will notice the changes because they will get a lot of paper,” Ferber admitted. “I know this problem, but honestly information and disclosure are key, so I hope that clients will get better advice than in the past.”