MiFID II to be delayed until 2018

The start date of the Markets in Financial Instruments Directive (MiFID II) has been pushed back by a year, meaning it will not be applied until January 3, 2018.

The European Commission proposed the delay yesterday to take into consideration the considerable technical implementation challenges faced by regulators and market participants.

MiFID II implementation will require the European Securities and Markets Authority (ESMA) to collect data regarding 15 million financial instruments and set up a complex technical infrastructure for it work effectively, according to a statement from the EU Commission.

The directive has been extended because some rules are still unclear and work still needs to be done around some of the key aspects, and the initial start date of January 2017 is not enough time for those affected to get the necessary systems ready.

“Given the complexity of the technical challenges highlighted by ESMA, it makes sense to extend the deadline for MiFID II. We will therefore give people another year to prepare properly and make the necessary changes to their systems,” Jonathan Hill, commissioner for financial services, financial stability and the Capital Markets Union, said in the statement.

MiFID II aims to address the initial weaknesses found in the EU securities market by reinforcing and replacing the current European rules on securities markets. The directive is likely to only affect some private equity firms and is less relevant to most them than the Alternative Investment Fund Managers Directive (AIFMD).

However, firms that are affected by MiFID II should monitor national implementation, the issues that have been already consulted on by the FCA, and those that will continue to be consulted this year, including moves at Member State level to apply MiFID requirements to AIFMs in order to create a level playing field, Clifford Chance partner Simon Crown told pfm.

In particular, firms that carry out MiFID activities such as advising or portfolio management conducted by AIFMs, should continue to consider their implementation of product governance and inducement rules, and should follow debates within industry associations on how these requirements should be implemented by private equity firms, said Crown.