By Lawrence White
Europe’s smaller exchanges and investment funds are breathing a sigh of relief at the latest draft of the European Commission’s Market in Financial Instruments Directive (Mifid). Some of the more challenging compliance requirements in the level-two implementation measures released this February have been mandated as EU directives, permitting member states a greater degree of interpretive leeway than if they had been in the form of regulations, as many feared.
Governments might now be able to soften the transition process by interpreting the new directives as they see fit, but slow-movers and blinkered brokers could still suffer in the new pan-European trading landscape.
“Firms operating in a single state, like some of the UK retail brokers, may be threatened by the increased competition unless they can adapt,” says Alan Jenkins, chair of the cross-jurisdiction team of the Mifid Joint Working Group. “Before the publication of the level-two measures the uncertainty was killing everyone, but now we’re confident that Mifid will help to create a more attractive capital market. We need to demolish any remaining excuses firms may offer for non-compliance.”
Before the February announcement, many in feared the directive’s stringent best-execution and record-keeping obligations might force brokers unable to meet the high costs to consolidate or outsource their trading.