We welcome the certainty which the announcement that the MiFID II package will be delayed by one year brings for firms in the EU. Since ESMA’s request last October that parts of MiFID II be delayed, firms have had to continue their MiFID II implementation plans with the uncertainty of the delay to all or part of the package hanging over them.
On 10 February 2016, the Commission proposed a one year extension to the entry into application of MiFID II and MiFIR. The entire MiFID II package, comprising the recast directive and MiFIR will therefore not come into effect on 3 January 2017, but on 3 January 2018. It was decided to follow a “full delay”, i.e. MiFID II and MiFIR are delayed entirely and not only certain parts of it. This will come as a relief to firms as it provides greater certainty than a more complex delay of only parts of the legislation. The new deadline will now need to be approved by the European Council and the European Parliament.
The extension of entry into application should not impact adoption of delegated acts and technical standards. The Commission should adopt these measures in accordance with the procedure envisaged in order to allow the industry to set up and adjust internal systems to ensure compliance with new requirements.
There have been some rumours in the past about a potential delay of MiFID II and MiFIR. However, the scope (both from a time and content perspective) of such delay was unclear until now. The delay is especially caused by the complex technical infrastructure that needs to be set up for the MiFID II package to work effectively. ESMA has to collect data from about 300 trading venues on about 15 million financial instruments. The European Commission was informed by ESMA that neither the competent authorities nor the market participants would have the necessary systems ready by 3 January 2017.
Firms should use the additional time they have to implement MiFID II wisely. The scale of the challenge remains considerable, so firms should not see the delay as a reason to put their implementation plans on hold, particularly where technology changes are required. Rather, they should seek to use the additional time available to perform the deep impact analysis required to facilitate strategic decision making.
Despite the greater clarity that the announcement brings, some areas of uncertainty remain for firms. As MAR is set to enter into application on 3 July 2016, there is already a provision in it, which ensures that before the originally foreseen date of entry into application of MiFID II, concepts and rules of MiFID I will apply. However, the interaction with PRIIPs still remains unclear.
Besides that, it seems at this stage that national legislators will not be given an extension to the June deadline for national transposition. On the one hand, the timetable for national legislators is now very tight to consult on draft rules and create the necessary legislation. On the other, a delay to this process would begin to undermine the reason for the delay to the whole package. We would urge clarity on these issues as soon as possible so that firms are able to proceed with confidence with their regulatory reform programmes.
You can find the press release here.