For the last two years there has been no end of so called experts announcing how MiFID would totally change the securities market in Europe. Noticeably their message of gloom was modified as MiFID neared towards implementation and no clouds had been spotted
to fulfil the MiFID soothsayers, scaremongering and trying to panic the market. After MiFID implementation last November the expert gloom and doom merchants switched their message as the market calmly met its MiFID targets. The scaremongers then switched their
tactics often using the term "this is a marathon not a sprint". This obviously to enable ongoing future sales of their MiFID related products. Well, we are now six months into MiFID and what's changed?
Sure we have a number of new trading venues in the offing (Some already working, some due to go live this year) but we have also seen several announce closure. I suspect this will be the future trend as the trading venues suffer with lack of volume and liquidity.
The markets do not give away their business over night and a lack of liquidity will drive new trading venues out almost before they are in!
Hence we can expect most new trading venues to struggle against increasing competition from new and old alike. Traditional Stock Exchanges still hold pivotal market positions and it's going to be extremely difficult to move them. Thus most new venues will
come and go fairly quickly.
So don't hold your breath and expect these new trading venues to drastically change the current order flow or provide strong competition with the existing Stock Exchanges. You only have to look at the US market, where the New York Stock Exchange and others
eventually absorbed the threat of ECNs.
If reading or listening to the MiFID doom and gloom merchants one should have first noted where they worked and what they were selling? The motivation for revenue often determines the message being sent. Hence consultants will normally be first in the line
trying to stimulate interest and fat contracts, immediately followed by the software suppliers hard pressed to sell more product or enhanced licences. Now who amongst us does not appreciate the truth in this statement?
It's more revealing when gauging the real situation in the market by focussing on how the traditional structure organisations are responding to MiFID and how they are meeting the requirements of the member financial firms. The trade associations have by
and large performed wonderfully well with MiFID, with MiFID Connect taking all the plaudits in this space. Other organisations have demonstrated vested interests and actually damaged the market. The purveyors of doom that have dominated the media have not
been prepared to present MiFID as a done deal due to their own interests. We all know who the main protagonists of MiFID woes are and I am afraid they are now becoming just a little comical with their constant presentation of MiFID as some kind of regulatory
Armageddon! The games up chaps so let's please move on!
We can now see that most financial services firms have achieved the MiFID objectives and in reality they have always been comfortable with MiFID. The evidence appears to show that most firms very quickly understood their position and reacted accordingly
to ensure MiFID compliance. There is no evidence yet of any major failure of any financial services firm under new regulations, as a result of MiFID. The software suppliers to financial services companies have performed admirably and supported their customers
making sure of MiFID compliance. There appears to be no evidence that any existing technology has ultimately been found wanting in the customers MiFID projects.
I have often been on the tail of the regulator but in the case of MiFID I can give them a well earned pat on the back.
The UK regulators are very comfortable in their firms being able to comply with the new rules. Any sanctions for not complying with MiFID are unlikely to be levied until the market has settled down post MiFID and the current financial crises has subsided.
No one will be over burdened with regulatory policing while they have to come to terms with the present difficult market conditions. This is sensible policy being used by the FSA and a more consultative approach than that of the past.
The traditional Stock Exchanges in Europe are all thriving and with new system developments beginning to be rolled out, all have responded positively to new regulations and changes in the market. The status quo looks like it will be maintained in the market
for the immediate future.
So the next time anyone contacts you from an organisation that has MiFID in its name run a mile. They are after your budget and will provide little or no value! Next time a supplier tries to sell you solution that can be enhanced for MiFID beware. Most of
the top quality suppliers have already incorporated MiFID solutions and are moving on to more exciting functionality. MiFID is now old hat! It was never a difficult project to achieve and virtually every firm is able to meet the regulatory requirements. Some
financial services firms have plans to develop their business others plan to stay as they are, either strategy can be good depending on the firm.
Well, November 2007 has come and gone and it's about time we all put the debate about MiFID behind us and concentrated on the future. Companies should really focus on some of my major concerns about the future including the indications of a greater risk
factor as evidenced by Soc Gen, the credit crunch and the down turn in the global economy. But all these are well known and established risks which are included in counterparty, customer, market and operational risks and have always been the main areas that
financial services need to focus on and find an effective solution for. Continued focus on the important objective of risk mitigation will bring about tangible business benefits for companies and their clients. With success in this area, the global concerns
brought by financial crises will also be tackled, limiting potential systemic impacts in the markets. This will enable greater management and control by Governments and central banks. In this context I have to say move on, MiFID is yesterday's news!