MiFID: nested IFs are important

Here are a couple of interesting ideas that I’ve heard in two different countries in the last week from different people.

“If MiFID comes in on 1 November (note the ”If”) then it will come in gradually, and compliance mayl only be an issue from perhaps March.”

“If we have an Execution Policy that states that we will continue to execute client orders only on-exchange, the fact that the client signs this agreement removes any question of having to deliver Best Execution.”

There are some pretty important “Ifs” in the thinking of some investment firms, it seems.  They still aren’t thinking enough about competition.  Their idea is that as long as every investment firm stands still and does nothing, there is no problem.  It’s like that old line about “If a tree falls in the forest…” – but with a difference.

“If all of the ostriches all put their heads in the sand at the same time, then the nasty MiFID monster goes away!”

Let’s add another “If”.

If there were no signs of change in competitive activity as a result of MiFID, why should a firm change the way that it does business with its customers?

For that “If” to be valid, you’d have to ignore Project Boat, Project Turquoise, Instinet Chi-X, and significant fee reductions that have already been made recently by some major exchanges.  And the Systematic Internaliser projects that have been running iin some major banks for over two years now, under wraps.

The competition is already moving, and order flow is already changing direction.  Not just in the UK.

Depending on those “Ifs” is going to be a pretty risky business.

Wasn’t it Rudyard Kipling who said that “If” is the biggest little word in the English language?