Markets in Financial Instruments Directive MiFID
MiFID(Markets in Financial InstrumentsDirective) of European Commission’s established to aim at:
• strengthening investor protection throughout the European Union (EU)
• improving the transparency and efficiency of European financial markets
• allowing investment firms to provide services across all member states based on the
authorization of their home jurisdiction – the so-called ‘EU passport’ scheme
Pivotal to the objectives of MiFID is Article 21, which requires firms to “take all reasonable
steps to obtain, when executing orders, the best possible result for their clients, taking into
account price, costs, speed, likelihood of execution and settlement, size, nature or any
other relevant considerations.”
Article 21, explains a briefing published by the law firm, Freshfields Buckhaus Deringer, “also requires a firm to establish and implement an order execution policy to enable the best possible result for client orders. The policy must include information on different execution venues and the factors affecting the firm’s choice of venue.” General consensus among market analysts is that MiFID represents a very important landmark for the global financial services industry. Possibly erring on the side of hyperbole, Celent, for example, has described MiFID as “the most far reaching reform of any major financial market ever undertaken.” In an assessment entitled ‘Capturing Value from MiFID,’ meanwhile, KPMG and the Economist Intelligence Unit (EIU) advise that “of all the changes brought about by FSAP [Financial Services Action Plan] directives, it is arguably MiFID that will have the greatest impact.” In spite of these assessments, it seems that the European financial services industry is woefully under-prepared for the arrival of MiFID. As the KPMG/EIU report comments, “worryingly, only 29% of respondents said that they have assigned a project manager to oversee their organizations’ implementation of MiFID. Naturally, this raises concerns about the readiness of firms to implement MiFID. Of even greater importance is the number of organizations which have not yet put MiFID firmly on the Board agenda. Thirty-five percent saw senior management lack of awareness as one of the biggest threats to their business being ready for MiFID.” A more recent survey, published in March 2007 by the business software company, Handysoft, found that almost one-third of UK-based financial institutions are not expected to MiFID.
meet the compliance deadline at the start of November. EU-wide, that
share rises to almost two-thirds. The same survey discovered that almost half of UK firms have no dedicated MiFID compliance officer overseeing the transition to the new regime. Anecdotally at least, this apparent level of under-preparation appears to extend to banks active in the foreign exchange market. When Euromoney contacted a handful of leading London-based European banks, in April, requesting interviews with FX chiefs about their preparation for MiFID, the response (if any) was generally that they would be unable to comment “at this stage”.
