More Mifid risks are coming

LONDON – Representatives from financial services firms and regulators believe the management of changes yet to come represents the gravest risk attached to the Markets in Financial Instruments Directive (Mifid).

The seminar revealed how much ground still needs to be covered in industry compliance to Mifid, and how much the directive itself must evolve, before full implementation can be achieved. This is despite the directive coming into force last November.

Speakers at the seminar – held by risk consultant Protiviti – expressed fears at the timing and scope of future Mifid changes and extensions, especially with regard to commodity derivatives.

Interpretation of future European Commission pronouncements, the Committee of European Securities Regulators’ (CESR) extensive and ongoing Mifid regulatory programme, and changes by the various national regulators at member state level are also viewed as sources of risk over the directive’s first one to two years.

Speakers addressed concern at the financial burden of Mifid compliance under these levels of supervision and about the interpretation of principles-based regulation at the national level – most notably by the UK supervisor, the Financial Services Authority.

The risks of increased technological automation of the transaction process and possible opportunities to be had through international co-operation with US regulators were also discussed.

“It is clear that, with the passing of November 1, we have not seen the end of Mifid, but perhaps something more akin to the end of the beginning. There is, unsurprisingly, a large element of ‘Mifid fatigue’ now following the implementation marathon,” said Jonathan Jesty, Protiviti director. “The market must not lose sight of the next wave of Mifid-related change that the EC and CESR are clearly contemplating.”