Frequent subscribers of this blog may remember MiFID I coming into force on 1 November 2007, fundamentally revising the existing rules applicable to, amongst others, European firms providing portfolio management and broker dealer services in the EU.

As part of the EU’s never ending tsunami of financial services legislation, MIFID II will come into force on January 3, 2017, and will form the legal framework governing investment firms, trading venues, data reporting service providers and non-EU firms providing investment services or activities in the EU.

High level rules in place, detailed technical rules not until next Spring

The implementation process is lengthy, technical and demonstrates the trials and intricacies of EU law making.

The text of MiFID II, an EU directive, and its associated regulation (“MiFIR”) are now in final form, though the various regulatory technical standards (“RTS”) and implementing standards (“ITS”) prepared by the European Securities and Markets Authority (“ESMA”) which support both pieces of legislation are still in draft, and need further endorsement from the European Commission.

The RTS and ITS are crucial here, and flesh out the ways in which firms must comply with the high level requirements in MiFID I and MiFIR.

However, any chance of an early or single endorsement from the European Commission is as rare as a happy banker at a Greek bail out meeting…

On June 29, ESMA published its draft ITS and RTS relating to authorisation, passporting, registration of non-EU firms providing investment services into the EU and co-operation between regulatory authorities.

The Commission has three months to endorse these standards, though to date they have not done so.

On August 31, ESMA published a consultation paper on the remaining draft ITS under MiFID II, covering:

  • Suspension and removal of financial instruments from trading on a trading venue – this includes the timing and format of publications and communications foreseen by MiFID II in case a suspension or removal of an instrument occurs.
  • Notification and provision of information for data reporting services providers – this looks at both the application for authorisation by DRSP applicants, as well as the notification of members of the management body of a DRSP and of any changes to its membership.
  • Weekly aggregated position reports for commodity derivatives, emission allowances and related derivatives.

ESMA intends to send the final report to the Commission for endorsement by January 3, 2016.

Finally, On September 28, 553 pages of RTS on the following areas went to the Commission:

  • Financial instrument transparency
  • Micro-structural issues – specifically around. algorithmic trading, providing direct electronic access and acting as general clearing members
  • Data publication and access
  • Requirements applying on and to trading venues
  • Market data reporting
  • Post-trading issues
  • Best execution

The European Commission then has three months from receipt of the drafts to decide whether to endorse them, following which there will be a period for the European Parliament and European Council to approve or object to the standards

So at the earliest, don’t expect the RTS and ITS to be in final form until next Spring. EU Member States are then required to implement MiFID II in their national legislation by the end of June 2016.

More From Dechert

  • For a summary of MiFID II and the consequences for asset managers, please click here.
  • For a copy of the materials of our recent seminar on this topic, please click here.
  • Dechert recently hosted a webinar on the impact on investment managers on November 4. Please click here for the playback.