In a recent breakfast seminar hosted by leading independent risk consulting company, Protiviti, senior figures from the financial services industry and regulatory establishment presented what they saw as the biggest risks and rewards following the 1 November implementation of MiFID.
Their collective voice was that managing the many changes still in store presents the biggest future risk from MiFID, but the rewards of eventual harmonisation will be the greatest benefit.
In the first of a series of regulatory risk breakfast seminars, the audience heard presentations on the top post-MiFID risks and rewards by Michael Folger, FSA’s director of wholesale and prudential policy, who has overseen FSA’s MiFID implementation programme; Anthony Belchambers, CEO of the FOA and chairman of MiFID Connect; Paul Burgess, compliance director in the securities division of Goldman Sachs; and Gareth Adams, director of regulatory strategy at Fidelity International.
Several of the speakers and guests expressed serious concerns about the scope and timing of future MiFID changes and extensions in relation to commodity derivatives, and about the risks of future interpretations and pronouncements from CESR and from the European Commission. These, together with differing interpretations and implementation timetables of Member State governments and regulators, created a significant business and regulatory risk over the next one-to-two years, it was feared, and would make it tough for financial institutions to devote the resources to keep up and with and manage the further changes in store. Nonetheless it was essential for them to do so and not to allow all the good work in lobbying and preparing for MiFID up to 1 November to be diminished.
The speakers also highlighted the many uncertainties of the business and commercial implications of MiFID, which will gradually become clearer over the next months now that the main technical and legal preparations are drawing towards completion in the major financial centres. The emergence of systematic internalisers, the development of the ‘Boat’ MTF consortium, and the fears over the fragmentation of liquidity would all be monitored very closely over the coming months.
“It is clear that with the passing of 1 November 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. However, firms need to move their focus from the compliance, documentation and implementation challenges, which are substantially met, to the business risks and benefits to them, with regard to both changes internally in their own operations and externally in the UK and European markets in which they compete. They must also not lose sight of the next wave of MiFID-related change which the Commission and CESR are clearly contemplating,” says Jonathan Jesty, director, Proviti.