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Addressing the Implications of MiFID II

By 24th April 2015 No Comments

There is a strong chance that by now, if you are a financial services firm trading in Europe, you will at least have started a plan which outlines how you will address the implications of the EU legislation known as MiFID II – Markets in Financial Instruments Directive II – and its accompanying regulation, Markets in Financial Instruments Regulation (MiFIR).

These EU-wide rules effectively entered into force in June 2014, and will both apply in full from January 2017 – the EU trading community’s deadline for compliance.

Time to take action

If you are thinking that 2017 sounds an awfully long way away, it’s time to think again. The sheer scale of the legislation and its associated regulations mean that there will be a huge work plan involved for all the firms covered if they are to be sure that, when MiFID II comes into force in 2017, they are all fully able to comply with its requirements.  And let’s not forget, this round of legislation covers more types of companies and individuals than had been the case for previous financial trading rules.

Recording client communications

One of the protections MiFID II will introduce, with its overarching emphasis on improving investor protection, is a set of far more stringent requirements in terms of communication, disclosure and transparency.  The regulations will mandate that firms record all telephone and electronic communications that relate to client orders. There is even an informed view that this will be extended to include face-to-face conversations. And while some individual European marketplaces already have regulations covering this area, the MiFID II directive goes further, including more organisations, individuals and communications than ever before.

Speedy confirmations and complaint resolutions

But while all this may sound onerous, it could actually bring real benefits; firstly by allowing firms to confirm verbally agreed trades really quickly, and secondly by enabling them to resolve complaints and issues with far greater certainty.  It would certainly get around the problem of finding yourself with conflicting recollections of a conversation, insufficient or inaccurate documentation.  In this respect the irrefutable validation of a communication between an adviser and the client will provide peace of mind.

Client opposition

While most clients would surely be comfortable with the knowledge that their calls, emails, instant messages and texts were being recorded – it happens virtually every time we call a customer service centre for example – there will be others, of course, who may object to this should it extend to a face to face setting.  In these cases, it is vital that the technology required is as unobtrusive as possible and that the participants know it is happening – in the ‘read them their rights’ manner.

So what next?

Organisations have a myriad of complex areas to address before the Jan 2017 deadline; indirect clearing, commodities, non-discriminatory access to trading venues, benchmarks, independent status, a whole host of organisational requirements etc.  The list goes on, and no doubt most organisations have internal task forces trying to apportion the challenge into bite-sized chunks.  With that in mind, when it comes to the technology, it may be a good time to seek advice from some subject matter experts. The pieces you need to solve that particular part of the jigsaw may be closer to hand than you realise.
By George Ralph, MD – RFA UK and Oliver Blower, CEO – Voxsmart

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