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This last-minute dash adds to the uncertainty for banks and money managers as they brace for an estimated $2 billion bill to comply with MiFID II, a sweeping rewrite of trading rules affecting stocks, bonds, derivatives and commodities. It also puts pressure on regulators across the EU to show lenience as the law comes into force.
“All countries have an industry asking their regulator for unofficial leniency,” said Rob Moulton, a London-based partner in financial regulation at Latham & Watkins law firm. “And that is getting unofficially supportive feedback.”
The MiFID II package consists of two main parts. The Markets in Financial Instruments Regulation, or MiFIR, is binding in its entirety and applies directly in all EU countries. The revised directive, MiFID, must be put into national law before it takes effect, a process known as transposition.
“Member states are still continuing their transposition,” Valdis Dombrovskis, the EU’s financial-services policy chief, said on Oct. 17. “It must be said it’s relatively late in the process. Of course from the European Commission’s side we are following very closely this transposition to make sure that its application is uniform across the EU.”
Infringement Proceedings
While EU directives are binding as to the result to be achieved, national authorities have some discretion in how they achieve that result. In practice, that means the rules will look a little different in each EU country. It has also allowed for an additional round of industry lobbying to tweak, roll back or delay curbs.
The deadline for transposition of the MiFID directive was July 3. The European Commission, the EU’s executive arm in Brussels, has infringement proceedings pending against the laggards. If a country doesn’t fall into line, it can eventually be taken to court by the commission and even fined.
Most governments contacted by Bloomberg said they expected to have all the necessary regulations in place by Jan. 3, though in Finland, for example, the Finance Ministry said the schedule is “tight but possible.” In Luxembourg, home to many major investment funds, and Belgium, which hosts the EU legislative machinery, national legislation is still in the works. The Latvian regulator said it will ensure that the rules are followed even if the law’s not adopted by the start date.
In Finland, the financial industry has pressed the country’s watchdog to show leniency at the start because the rules aren’t ready and still need to go through parliamentary debate before final approval.
‘Timely Fashion’
Some regulators have already indicated that they won’t bring the hammer down on day one. The German supervisor BaFin is “looking very closely at which processes are being put in place for the implementation and whether that is happening in a timely fashion,” spokeswoman Anja Schuchhardt said.
“But we are aware that the schedule is tight,” she said. “For that reason, we will maintain a sense of proportion particularly in the beginning phase as regards supervisory measures.” [...]