How Much of an Impact Will MiFID II Have On the Finance Industry?

By  //  February 15, 2018

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What is MiFID II?

With the implication of the MiFID II on January 3, 2018, financial institutions across Europe have either found themselves relieved that it’s finally come around so they can get new projects safely underway, or set in a nightmare as they realize how unfortunately unprepared they are for such a regulation.

With the implication of the MiFID II on January 3, 2018, financial institutions across Europe have either found themselves relieved that it’s finally come around so they can get new projects safely underway, or set in a nightmare as they realize how unfortunately unprepared they are for such a regulation.

No matter the level of preparation a business undertakes for this new policy, understanding exactly what MiFID II entails and what it means for the finance industry is vital. While companies such as NEX can help businesses adjust to these changes, a basic understanding is paramount, and so we’ve decided to investigate further.

What is MiFID II?

MiFID II is, in simple terms, a revamped and re-worked version of the original Markets in Financial Instruments Directive. MiFID II has been designed to greater protect investors, consumers and other businesses when it comes to financial services. With an aim to create better transparency across every asset including the likes of foreign exchange and exchange-traded funds, this legislation has taken seven years to come to fruition.

With seven years to mature and be reworked, it’s no surprise that it has over 1.4m paragraphs of rules, so regulators and companies alike can be expected to have a lot of work on their hands in the coming months.

What Does It Mean For The Financial Services Industry?

Any firm who provides any financial investment services will be subject to MiFID II, and must comply with the regulation it provides. Dealing, broking, asset management and advisory services that are not only provided by banks, but non-banks and other service providers too are all affected, and every firm from investment firms, to market operators, all the way through third-country firms and data service providers are all subject to MiFID II rules.

With this new regulation, there is an incredible amount of data which now needs to be recorded. Any financial institution who provides financial advice, recommends products or makes any transactions over the phone must record all calls. All face to face meetings must be formal, and notes must be taken. This includes records of all transactions which must be updated and reported on a regular basis.

This is just one of the many regulations that have come into place, with financial institutions having more control over their own data destruction and disposal, their Cloud and so much more.

What Can Businesses Do To Comply?

So how can financial institutions actually achieve full MiFID II compliance? At first glance, full compliance can seem difficult to understand, but thankfully there are a few steps that companies can take to be better prepared. We’ve pulled together just a few to get started:

Change Technology

With the rise of technology across every industry, it’s no surprise that MiFID II will encourage businesses to adjust and adapt their technologies to better improve the services they provide and meet regulation requirements. These alterations could include anything from client database refinement, customer portal adjustments, better trading facilities and post-trade reporting transparency. Any kind of technology that will accurately record data and them provide full disclosure is ideal for full and easy compliance.

Establish A Data Governance Framework

Data is a key component of MiFID II and the key requirement, as a result, is that financial institutions understand, and are recording and reporting on any data they store. A data governance framework will make this easier on businesses and allow for accurate MiFID II compliance too, as well as offering firms a much more efficient process across multiple operations when it comes to data collection and management.

Reassess Your Business Framework

Every financial institution will have a business framework, but with new regulations comes the need for something new. Reconsidering and redefining products, the brand and the platforms used for trading are all key things that businesses should consider with these new regulations, especially when considering how they interact with clients and other businesses financially.

Data will need to be collected and stored in a central infrastructure to make regular reporting and full transparency as per MiFID II regulation – while this may seem difficult, third-party solutions can help ensure safe destruction of old data and easy integration of new processes.

MiFID II has caused relief and confusion across the entire financial industry, but with a little preparation and understanding, the impact it may have could be lessened, or at least improved.

Businesses need to adjust the frameworks, understand the full extent of compliance and most importantly, not be fearful of what it could mean. Above all, MiFID II is a good thing, with improved regulations and protection for consumers and businesses alike. With any luck, the industry will soon enough begin reaping the benefits!

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