As of January 2019, MiFID II has been live for a year. It has brought with it a huge overhaul of the investments industry and firms are continuing to encounter challenges around the implementation of this significant package of changes.
Over the past year we have helped many firms meet their MiFID II requirements by conducting an audit to review processes, procedures and reporting requirements. The biggest challenges firms have faced so far are:
MiFID II’s best execution requirements are extensive. Under MiFID II firms now need to demonstrate they have taken all sufficient steps, rather than (as previously) all reasonable steps to obtain best execution and make the required public RTS disclosures.
The requirement to ‘unbundle’ research costs from the rest of sell-side services is thought to have taken a toll on research coverage and therefore liquidity as a result of reduced trading volumes. In the course of August, the regulator issued a request for information regarding research unbundling and other practices related to the new rules on inducements and payments for research to a number of firms.
MiFIR trade and transaction reporting
While the FCA has not said much new about trade and transaction reporting since its summer forum, it is important that firms continue to refine their processes in this area.
Costs and charges
MiFID II brought in a new disclosure regime for customer costs and charges. Firms are required to disclose to clients what the exact costs and charges are and to indicate how those costs have impacted performance for their clients. From early 2019, firms will have to disclose this information to clients.
Firms affected should be documenting the governance information required by the PROD sourcebook where they are manufacturing and/or distributing a product or service.
Please contact us to find out more about the MiFID II support and services we offer our visit our investments page for further information.