Called the ‘biggest regulatory change to European financial markets since the financial crisis’ by The Economist, MiFID2 promised to rebuild the financial industry from the ground up. One month on from MiFID2, we take a look at how Europe’s massive new financial regulation has changed our fintech landscape.
MiFID2 affects everything from shares and bonds to derivatives. The law’s new reporting requirements are particularly disruptive. According to an estimate by Expand (part of BCG and IHS Markit), financial firms spent USD 2.1 billion in 2017 preparing for MiFID2. A more comprehensive explanation of MiFID2 can be found here.
A primary goal of MiFID2 is to open opaque markets by forcing brokers to publicly report prices. Part of this reform requires investment banks to start changing separately for research. MiFID2 also restricts trading in ‘dark pools’ closed to retail investors to encourage transparency.
What was the aftermath?
The first hours of trading went smoothly, although trading volumes were lower than usual due to uncertainty. The preparations paid off. Another reason the ‘day of the MiFID’ went smoothly is regulatory reprieves. ESMA in late December granted a six month grace period.
Cordium has recently said, ‘industry consensus is still being formed.’ Mostly, it is early days and positively, there have been limited negative effects. The industry revolution is yet to take place.
Sixteen member states have now achieved full transposition status, according to the EC. However, infringement proceedings are pending against 19 Member States for delayed communication. This includes the Netherlands.
By Grace Appleford, Research Analyst.