MiFID II Roundtable

On 17 July 2015, the Financial Conduct Authority (“FCA”) held a MiFID II Roundtable discussion aimed at providing updates on MIFID II implementing measures and addressing various potential implementation issues in the financial services industry, arising as a result of the new directive.

Implementing measure concerns:

The roundtable discussion was based on feedback received from various trade associations, the European Commission’s legal services and the European Securities and Markets Authority. Upon examining the feedback, the FCA noted that there were four main themes to the issues identified in the key implementation concerns feedback they received. The four themes were spread throughout questions raised which related to both wholesale and retail and are as follows:

  • A variety of issues in regards to policy concerns were raised about where Europe or the FCA might end up in relation to issues covered by the delegated acts and technical standards and also the FCA’s Discussion Paper;
  • Concern was expressed about the technical challenges which might result from the scale and nature of the systems changes needed to implement various requirements (such as changes related to transaction reporting, position reporting, best execution disclosures, costs and charges for disclosure and inducement restrictions on research).
  • A considerable degree of uncertainty was expressed by firms as they were finding it difficult to plan key processes without the knowledge of when and how equivalence determinations would be made, how the process for applying for exemptions from position limits would work and how commercial firms would work through the process of applying to be authorised if that turned out to be necessary.
  • There were concerns about the lack of certainty in regards to interpreting what the legislation requires in certain areas, including the quoting obligations under the non- equity systematic internaliser regime, the boundaries between organised trading facilities and multilateral trading facilities, fields in various reporting regimes, the concept of ‘target market’ in product governance and aspects of the suitability regime.

The above expressed concerns had been shared with policy experts throughout the FCA and will be considered going forward with the process of implementation. However given their nature, it was emphasised that firms need to plan effectively for implementation. As a result, the FCA and other ESMA members have expressed their appreciation for providing guidance on these matters, on the overall implementation of the directive to firms and assisting them with a smoother transition.

Below is a summary of some of the specific questions addressed by the FCA at the roundtable:

  1. Wholesale
  • The regime for Energy Market Participants who are not MiFID firms is currently subject to the UK’s regulatory boundary after MiFID II implementation. The FCA acknowledged that there is some lack of clarity in regards to this matter and has raised it in discussions with HM Treasury.
  • Specific challenges were identified around the authorisation of commodity derivatives firms and identification of statutory instruments linked to the EU financial trading market size. The FCA stated that this issue was being considered by ESMA in regards to assisting firms and ensuring a consistency of approach across the EU.
  • In regards to the availability of information on instruments trading on trading venues across the EU, the FCA has stated that ESMA will be publishing information on reference data.
  • In regards to the position limit reporting regime, the FCA has stated that it will be communicating directly with exchanges in relation to the contracts that are within its regulatory remit.
  • The FCA will consider the over reporting of transactions as a potential issue which might arise due to the lack of data available.
  • There had been questions in regards to the implications of the widespread requirements for legal entity identifiers in response to which the FCA has suggested that it might provide additional information on this matter on its website.
  • A number of questions were raised in regards to the MiFID II taping requirements, the FCA clarified that the taping rules do not require taping of face-to-face conversations and the taping of phone conversations will be similar to the taping requirements that are currently in place.
  1. Retail
  • Product governance: a lack of clarity was identified in regards to identifying a product’s target market range, the FCA have acknowledged this issue and it shall be addressed
  • As there was some uncertainty around this matter, FCA confirmed that the MiFID II costs disclosure requirement applies to execution-only business and also that such a disclosure is already required under Art 33 of the existing directive.

To see the full MiFID II Roundtable report please follow this link.

Should you need any assistance in regards to MiFID II implementation and/or clarifications in regards to the new requirements, Cleveland & Co, your external in-house counsel, is here to help. Please get in touch.


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