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MiFID II was originally due to be agreed in principle by the end of 2013 but a series of disagreements have seen that deadline slip. Areas of MiFID II that have already been agreed during the four-month trialogue process include supervision of algorithms and curbs on high-frequency trading, a cap on dark pool trading and limits to the use of reference price waivers.
Members of the European Parliament are facing elections in May but are expected to leave Brussels as soon as February to begin campaigning. Christian Krohn, managing director at the Association for Financial Markets in Europe, said: “Gaining political agreement on the primary texts is clearly easier said than done and there is a risk that failure to reach agreement in the next month or so could delay this part of the process until after the European Parliament elections in May".
The European Commission is also scheduled to be replaced in October and rumours suggest current European Commissioner responsible for MiFID, Michel Barnier, could be nominated by France as a candidate for European President, meaning further delays to agreeing MiFID II could result in the legislation being put on the back burner until next year.
Among the outstanding issues to be resolved are perimeter guidance, which concerns the final scope of the firms affected by MiFID II, and some provisions on commodity markets. Open access to central counterparties is also likely to prove a major sticking point in the coming weeks.
Alex McDonald, CEO of the Wholesale Markets and Brokers Association (WMBA), believes that time pressures will force trialogue participants to make concessions to ensure MiFID is pushed through. However, Andrew Bowley, head of business operations and risk at agency broker Instinet Europe, warned that rushing the trialogue process could result in damaging regulation.
While agreement on the final text of MiFID may be close, the AFME's Krohn said that the lengthy implementation process means market participants are unlikely to have a full view of how market structure will change in the near term. He said: “Even when the primary texts are agreed, a great deal of work will need to be done to develop the implementing measures necessary to give them effect, so regulatory uncertainty will remain a key feature of 2014 and beyond".