MiFID II: From a compliance to a business challenge
When the first Markets in Financial Instruments Directive package entered into force, the European legislator did not expect the text to be applied as it is today. Requirements on inducements and their full transparency for the customer have been interpreted and implemented differently by the industry.
Moreover, innovation, market and technological developments (e.g. high frequency trading), and growing complexity in financial instruments have outpaced current MiFID provisions.
As a response, Europe has proposed and recently voted on a recast of the package, comprising a directive (MiFID) and a regulation (MiFIR), collectively known as MiFID II. The new package runs to more than 700 pages, to which detailed standards based on the ESMA guidelines will be added.
What is new with MiFID II?
Unsurprisingly, most of the provisions contained in MiFID are strengthened in MiFID II, for example: an enlarged scope of products and activities, a revised marketing and targeting process, more comprehensive client profiling, a broader definition of complex instruments, more detailed client reports and new pre- and post-trade reporting. All of these changes will bring further transformation to the banking and asset management industries, which must be compliant by the end of 2016, the expected implementation date.
Inside magazine issue 5, June 2014
Inside is Deloitte’s quarterly magazine offering an exclusive insight into best practices, trends and opportunities faced by our clients across all industries.
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