Article as appeared in Sunday Mail Newspaper - 21 October 2007
Significant EU Securities Legislation
The Markets in Financial Instruments Directive (MiFID) is the most significant piece of EU securities legislation to date. It is already changing market dynamics which will impact all investment sectors and could offer new opportunities. Market participants need to consider fundamental strategic options in order to establish an effective operating model in the post-MiFID world.
As Cyprus is a member of the European Union, Cypriot firms will also be affected by MiFID. The Regulators are already taking steps towards adopting MiFID; the target date for implementation is 1 November 2007.
Major Issues
- Three different protection regimes depending on the ‘sophistication’ of the investor: key elements of which hinge on ‘best execution’, client information and order handling requirements.
- The removal of the ‘concentration rule’ opens up the possibility of multiple trade venues.
- Significant steps to enhance market transparency through pre and post-trade transparency rules coupled with transaction reporting.
- Overriding emphasis on senior management responsibility in terms of organisational arrangements including managing conflicts of interest and outsourcing.
- A shift in perspective in how the EU passport will work with the possibility of far more cooperation and collaboration between regulators.
The EU market is already responding with promoting activity around the stock exchanges, creating new trading venues and developing new business models for data aggregators and disseminators.
Assessing the impact and implementing the required changes in your firm.
The effectiveness of a firm’s approach in assessing the impact of MiFID and implementing the required changes will have a direct influence on the firm’s future profitability.
How can PricewaterhouseCoopers assist
PricewaterhouseCoopers can assist in many ways, depending on which stage the company currently is, indicatively:
- Carrying out an impact/gap analysis to consider the effects on your business
- Establishing an effective project management process
- Considering strategic, market-wide impacts and opportunities
- Assisting in identifying conflicts and advice on mitigating controls
- Assisting and advising on the process of re-classification of clients
- Determining the quality of client data against the new suitability requirements
- Assessing the quality of outsourcing controls in line with new requirements
- Assisting in developing ‘best execution’ policies
- Establishing procedures for data management and record retention
- Delivering training programs for key staff
- Carrying out MiFID readiness reviews (‘health checks’).
