News | MiFID II Start your engines now
Just over half of financial services firms are undertaking a review of the impact of MIFID II before the year end, according to a recent survey conducted by Pricewaterhouse Coopers. Broker dealers were first out of the starting gate but asset managers are lagging behind them as well as retail and private banks.
According to Ullrich
Hartmann, financial services partner at PwC, recognising the importance of considering MiFID II within the broader landscape of regulatory reform should help firms manage their change programmes in a more effective manner, compared to those who intend to deal with MiFID II in isolation. MiFID II is not just a compliance exercise. Given the magnitude of commercial and operational impacts, successful implementation will require early involvement of relevant business lines and key functions such as IT and operations.
About 79% of the fund
management houses canvassed have or intend to raise internal awareness but the majority has not yet taken the plunge in terms of analysing the commercial and operational impacts on their business. Perhaps this is not surprising given the fact that regulators are still debating and discussing the final version. In
6 Ullrich Hartmann, PwC
addition, MiFID is only one piece in a large jigsaw which includes AIFMD, UCITS and FDACTA. As Ali Munib, director at PwC, points out these rules unlike MiFID II have clearer or earlier deadlines, which explains why managers are devoting more resources to them. “Regulators hope to implement MiFID II from 2014 but realistically we think it could be as late as 2015,” he added. One of the biggest bones of contention for asset managers particularly those within the hedge fund community is the proposals to shine a brighter light into the normally opaque world of high frequency trading and algorithmic trading platforms. This could force quant based hedge fund managers to report the nature and process behind their strategies and compromise the
value propositions. The new rules would also require them to provide liquidity throughout the trading day.
Some have criticised
regulators for failing to distinguish between algorithmic traders and high-frequency traders. The PwC report said MiFID II’s provisions on algorithmic trading could result in some asset managers rethinking their strategies. “This is something regulators are again reviewing. They are working on making the definitions in the proposals more specific as they do not want to have any unintended activities captured,” said Ali. “However, what is not in doubt is that regulators are going to demand tougher risk management and controls at firms with high frequency trading platforms,” he added. ■
Best Execution | Autumn 2012
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