MiFID II compliance – are we ready?

Author:Lukasz Prorokowski
Position:H.L.Prorokowski Consultancy, Wroclaw, Poland
Pages:196-206
SUMMARY

Purpose - This paper aims to discuss the impact of nascent Markets in Financial Instruments Directive (MiFID II) initiatives and, thus, to deliver practical insights into MiFID II implementation, compliance and cost reduction MiFID II constitutes the backbone for the upcoming financial market reforms. With the first proposal of MiFID drafted in October 2011, this regulatory framework has undergone over 2,000 amendments. As MiFID II currently stands, this Directive... (see full summary)

 
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MiFID II compliance – are
we ready?
Lukasz Prorokowski
H.L. Prorokowski Consultancy, Wroclaw, Poland
Abstract
Purpose This paper aims to discuss the impact of nascent Markets in Financial Instruments
Directive (MiFID II) initiatives and, thus, to deliver practical insights into MiFID II implementation,
compliance and cost reduction MiFID II constitutes the backbone for the upcoming nancial market
reforms. With the rst proposal of MiFID drafted in October 2011, this regulatory framework has
undergone over 2,000 amendments. As MiFID II currently stands, this Directive attempts to address
issues exposed by the global nancial crisis.
Design/methodology/approach This study, based on secondary research and an in-depth
analysis of the MiFID II framework, investigates structural and technological challenges entailed by
this Directive. The analysis is broken down into the following sections: technological and structural
challenges; costs of implementation; MiFID II teams; facilitating near real-time regulatory reporting;
increased transparency requirements; and information technology (IT) initiatives for MiFID II
compliance.
Findings – MiFID II commands signicant changes in business and operating models. With this in
mind, the study indicates current technological and structural challenges faced by nancial institutions
and advises on ways of mitigating MiFID II risks. Although it is too early to assess the costs of
implementing MiFID II, this paper suggests ways of reducing MiFID II-related costs. The study also
advises on organising dedicated teams to deal with MiFID II. Furthermore, this paper argues that early
investments in IT systems and processes would allow nancial services rms to gain a competitive
advantage and, hence, scoop up market share or launch new, lucrative services – especially in the area
of collateralisation and market data processing.
Originality/value – This paper shows that the current version of MiFID II still requires a great deal
of attention from the regulators that need to readdress contentious issues revolving around the links
between MiFID II and other regulatory frameworks such as European Market Infrastructure
Regulation and Dodd–Frank. This study addresses the MiFID II compliance issues by adopting
European Union and non-European Union banks’ and asset managers’ perspectives and, hence, delivers
practical implications for risk managers and compliance ofcers of various nancial institutions.
Keywords Compliance, Compliance costs, European regulations, MiFID II,
Near real-time regulatory reporting, Transparency requirements
Paper type Research paper
1. Introduction
The Markets in Financial Instruments Directive (MiFID II) constitutes the backbone for
the upcoming nancial market reforms. With the rst proposal to extend and amend the
MiFID released in October 2011, this regulatory framework has undergone over 2,000
amendments – with the most recent deal on the second version of MiFID accepted by
European legislators on the 14th January 2014. As MiFID II currently stands, this
Directive attempts to address issues exposed by the global nancial crisis. In particular,
MiFID II is focussed on ensuring greater investor protection, market transparency and
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1358-1988.htm
JFRC
23,2
196
Journalof Financial Regulation
andCompliance
Vol.23 No. 2, 2015
pp.196-206
©Emerald Group Publishing Limited
1358-1988
DOI 10.1108/JFRC-02-2014-0009

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