MiFID II - why there is more to be done in 2018

MiFID II is one of the most far-reaching changes to financial market regulation yet. Investment and wealth management as well as wealth advisory firms are the most impacted segments, especially those who will now have to spend more time familiarising themselves with the new regulation where they have not had to deal with similar requirements with much rigour, in the past. Whilst the majority of firms will have ensured they were compliant to meet last week’s deadline, there is more to be done in 2018.

Specifically, in the areas of data and reporting, Financial Institutions (FIs) will need to update their systems and/or processes that support compliance - not just around MiFID II but also allied standards such as the Standards for Minimum Capital Requirements for Market Risk, also known as the Fundamental Review of the Trading Book (FRTB) published by the Basel Committee on Banking Supervision (BCBS).

As with most of the recent regulations in capital markets, the focus going forward will not just be on transparency but equally on traceability that is almost on-demand and near real-time, for clients and regulators alike. This means, FIs will have to take a closer look at both their legacy systems and their more recent investments in cutting-edge trading technology. Integrating new regulatory requirements seamlessly to keep the wheels turning, whilst balancing day-to-day operations of the trading and banking books will also be a tall order.

So far, the focus has been on enhancing the systems and processes for reliability and transparency of transaction / electronic trade reporting across more asset classes as well as compliance and investor protection, leading to large scale data validation, consolidation and dissemination of information between market participants. However, this is only the beginning of the road to promote greater competition, transparency and financial stability.