MiFID II: the next step

Fiona Richardson and Mark Spiers

November 2015

2

What we are covering today

Where are we now?

2014 2015 2016

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FCA Authorisation

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MIFID II

No longer exempt?

OTF?

Data Provider?

Jan 2016 Authorisation process set out

Q1 2016 Forms available on FCA website

Apr 2016 Pre application meetings

Apr 2016 Gateway for draft applications open

3 Jul 2016 Deadline for applications

Recap on the levels of MiFID

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Level 1 – Framework Legislation

• Delegated and Implementing Acts

Level 2 – Implementing Measures

• Implementing Technical Standards and Regulatory Technical Standards

Level 2.5 – Technical Standards

• ESMA issue non-binding guidance on the meaning of the Levels 1 and 2

• National regulators comply or explain

Level 3 – Regulatory convergence

• Enforcement action by EC for failure to implement or inconsistent implementation

Level 4 – Enforcement of Directive

Recast MiFID

MiFIRMiFID

II

you

are

here

Technical Standards

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Technical

StandardTopic Subject

RTS 1

Transparency

Equity Transparency

RTS 2 Non- Equity Transparency

RTS 3 Volume cap mechanism

RTS 4 Derivative trading obligation

RTS 5Derivatives that have a direct, substantial

and foreseeable effect in the EU

RTS 6

Microstructural

Algorithmic trading, providing direct

electronic access and acting as general

clearing members

RTS 7Requirements on RMs, MTFs and OTFs

enabling or allowing algorithmic trading

through their systems

RTS 8Market making agreements and market

making schemes

RTS 9 Ratio of unexecuted orders to transactions

RTS 10Requirements to ensure co-location and fee

structures are fair and non-discriminatory

RTS 11 Tick size regime

RTS 12Determination of a material market in terms

of liquidity relating to trading halt notifications

RTS 13

Data

Publication and

Access

Authorisation, organisational requirements

and the publication of transactions for data

reporting services providers

RTS 14 Data disaggregation

RTS 15Access in respect of central counterparties

and trading venues

RTS 16 Access in respect of benchmarks

Technical

StandardTopic Subject

RTS 17

Trading

Venues

Admission of financial instruments to

trading on regulated markets

RTS 18Suspension and removal of financial

instruments from trading

ITS 19Content and format of the description of

MTFs and OTFs

RTS 20

Commodity

Derivatives

Criteria for establishing when an activity is

to be considered to be ancillary to the main

business

RTS 21

Methodology for the calculation and the

application of position limits for commodity

derivatives traded on trading venues and

economically equivalent OTC contracts

RTS 22

Market Data

Reporting

Transaction reporting obligations

RTS 23 Financial instruments reference data

RTS 24Maintenance of relevant data relating to

orders in financial instruments

RTS 25 Clock synchronization

RTS 26Post Trading

Issues

Obligation to clear derivatives traded on

regulated markets and timing of

acceptance for clearing

RTS 27

Best Execution

Quarterly report by Trading Venues, SIs,

MMs and other liquidity providers

RTS 28Annual report by investment firms to clients

(buy-side)

Remember the hopper?

7MiFID II

Trade

Transparency

Derivative

Trading

Information to

Clients

Telephone

Recording

Suitability

Appropriateness

Remuneration

Fair, Clear and

not Misleading

Conflicts

Product

GovernanceRecord Keeping

Advice

Client Assets

Complaints

Compliance

Inducements

Underwriting and

Placing

Eligible

Counterparties

Client

AgreementsAlgo and

HF Trading

Product

InterventionTransaction

Reporting

Best

Execution

Reporting

Best Execution

Transaction Reporting

Algo and High Frequency Trading

Best Execution

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RTS 27Quarterly report by Trading Venues, SIs, MMs and other

liquidity providers

RTS 28 Annual report by investment firms to clients

Transaction Reporting

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RTS 22 Transaction reporting obligations

RTS 23 Financial instruments reference data

RTS 24Maintenance of relevant data relating to orders in financial

instruments

RTS 25 Clock synchronization

Algo and HF Trading

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RTS 6Algorithmic trading, providing direct electronic access and

acting as general clearing members

RTS 7Requirements on RMs, MTFs and OTFs enabling or allowing

algorithmic trading through their systems

RTS 8 Market making agreements and schemes

RTS 9 Ratio of unexecuted orders to transactions

RTS 10 Fair and non-discriminatory co-location and fee structures

RTS 11 Tick size regime

RTS 12Determination of a material market in terms of liquidity relating

to trading halt notifications

Getting Compliant

There is a lot of content in MiFID II

Don’t wait for FCA rules or even the final EU legislation

Have you started yet?

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• read

• ascertain gaps

• develop solutions

• identify opportunities

Analysis and

planning

• change

• test

• train

• client contact

Implement

Yo

ur

pro

ject

• What rules apply to my business?

• Have they changed from MiFID I?

• If so, do I need to take action?

• What exactly do I need to do, and what

is the effort needed?

• Who is going to do it? How do I make

them?

Approaching your project line by line

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Management and business buy-in

• MiFID II is something you have to do yourself, not something that can

be done to you by consultants

• You and the whole business must be prepared to embrace the change

• Senior Management must support achieving compliance

Clear objectives and deliverables

• Proper project governance

• Clear understanding of what is compliance

• Each action needs to be clearly articulated

• Ownership and robust tracking of compliance

• Excellent reporting

Critical success factors

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“Expect questions from clients and regulators”

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Using Bovill to kick start your project

Our ToolKit

Questions

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