SunGard and TradeTech say that, according to the two firms’ joint second MIFID readiness survey, nearly two thirds of financial services firms have yet fully to identify budgets related to the Markets in Financial Instruments Directive (MiFID), with under a year to go until its planned implementation in November 2007.
The survey, the second in a regular series of polls by SunGard and TradeTech to gauge the changing attitudes of financial institutions towards MiFID, reveals that 65 percent of firms either have no overall plan or are yet to fully identify MiFID-related budgets. However despite this, general confidence remains high, with 80 percent of those questioned feeling that their firm remains on track with its MiFID preparations, only a slight drop from 84 percent two months ago.
The survey also reveals that of those respondents who had indicated making MiFID budget provisions, 50 percent have allocated less than €1 million, whilst 18 percent have budgeted between €10 and €40 million. 330 financial institutions have now completed the SunGard-TradeTech MiFID survey with 102 firms taking part in this latest round, in which global investment banks and global asset managers made up 44 percent of respondents, whilst 13 percent and 9 percent, respectively, came from European or domestic sell- and buy-side institutions.
The survey also suggested that ensuring best execution for equities remains a challenge for Europe’s financial institutions. Whilst 31 percent of respondents thought that they would have this in place by the end of the year when asked in September, now only 18 percent are confident of this timetable. The majority, 51 percent, now believe that their organisation will know how to ensure best execution by March 2007.
“We are on track with MiFID implementation, but there are several open questions about how the Directive will be implemented that we are working on clarifying,” says Pablo Orbiso, the vice president at Citigroup Global Markets Limited. “Citigroup Investment Bank (CIB) has set aside a significant sum of next year’s budget to implement any MIFID related changes in order to adhere to the new rules by November 2007. The forecast considers costs such as technology changes, training, legal and compliance, etc. Overall, we are viewing the project favourably because although it will have significant costs, the main benefits will be to simplify and unify the trading environment across Europe…that is, as long as the national regulators have a unified and consolidated interpretation of the key MiFID rules.”
“The timing, for an automated solution, is getting very tight,” adds Sheena Kelman, the director and head of dealing at Martin Currie Investment Management Ltd in Edinburgh. “Companies are unlikely to waste huge amounts of resource on final processes and systems, until the requirements are clear. The industry generally needs about an 18-month lead time to make really major changes to their processes. Unless the MiFID deadline changes, or the proposals are relatively straightforward, then the nearer we get to November 2007 the less likely it is that, however willing it is, the industry will be able to comply.”