2013年-CEPS欧洲政策研究中心_The_MiFID_Revolution_12页_251kb

The MiFID Revolution Summary

Core Content

The Markets in Financial Instruments Directive (MiFID) is a transformative regulatory framework that significantly alters the structure and functioning of European securities markets. It is not merely a compliance and IT upgrade exercise, but a revolution that will lead to deep and lasting structural changes across the financial services industry.

MiFID replaces the Investment Services Directive (ISD) and introduces a more harmonised regulatory environment, aiming to create a more integrated European capital market. It impacts a wide range of market participants, including investment firms, exchanges, data vendors, and asset managers, and has the potential to reshape market design, competition, transparency, and operational strategies.

Main Predictions on MiFID's Impact

1. Brokerage Industry Consolidation: Due to high compliance costs and increased operational complexity, the brokerage industry will undergo further consolidation, although smaller firms may still thrive due to their client proximity.
2. Exchanges Face Increased Competition: Exchanges will remain the main source of liquidity but will face greater competition in trade reporting and settlement from other exchanges and financial intermediaries.
3. OTC Markets Become More Regulated: OTC markets will become more transparent, competitive, and monitored, reducing their previous opacity and creating a more level playing field with regulated markets.
4. Rise in Algorithmic Trading: The demand for smart order-routing systems and execution algorithms will increase as traders seek to ensure best execution across multiple venues.
5. Increased Trading Volumes: Greater competition and transparency will lead to lower transaction costs and higher trading volumes, improving market efficiency.
6. Fragmentation of Liquidity Pools: The decentralisation of order execution will lead to greater fragmentation of liquidity pools, necessitating improved connectivity and common standards.
7. Market Data Will Become a Major Asset: With more execution venues, the need for market data analysis will increase, creating a new market for data services.
8. Buy-Side Firms Must Adapt: Buy-side firms will need to enhance their data management and execution monitoring capabilities to ensure the quality of execution for their clients.
9. Continuation of 'Goldplating': Despite efforts for harmonisation, national regulators may impose stricter rules, leading to a lack of uniformity in implementation.
10. Spillover Effects on Related Sectors: MiFID's rules will influence asset management and other financial sectors, especially under the UCITS regime.

Key Market Developments Pre-MiFID

• Shift from Bank-Dominated to Market-Based System: Over the past decade, European capital markets have evolved from being primarily bank-centric to more market-based, with bond issuance, equity capitalisation, and derivatives trading growing substantially.
• Impact of EMU: The introduction of the euro has contributed to the creation of a larger, more liquid, and stable currency zone, enhancing conditions for issuers and asset managers.
• Role of the ISD: The ISD facilitated market integration and competition, particularly through the free provision of trading screens and single brokerage licences, which helped consolidate the sector and improve price formation.
• Fragmentation of Markets: The deregulation of the London market (Big Bang) and the creation of screen-based quotation systems initiated the process of market fragmentation, which MiFID will further accelerate.

Implementation Challenges

• Complexity and Cost: MiFID is much more complex and detailed than the ISD, with a higher implementation cost for firms, especially large ones.
• Implementation Timeline: Member states were given until 1 November 2007 to fully implement MiFID, but many are expected to fall short.
• Strategic Preparedness: Surveys show that strategic preparedness is low, with most firms viewing MiFID primarily as an IT and compliance issue, rather than a strategic opportunity.
• Regulatory Disparities: Some national regulators, like BaFin in Germany, have provided limited guidance, while others, such as the UK FSA, have been more transparent and proactive in preparing for MiFID.

Strategic Implications

• Adaptation is Key: The directive will create a winner-takes-all scenario where well-prepared firms will gain a competitive edge, while less prepared firms may struggle.
• New Revenue Streams: The well-prepared firms can capitalize on new opportunities, such as algorithmic trading and market data services.
• Shift in Business Models: Exchanges will be challenged by investment firms and data vendors, leading to a reconfiguration of traditional market structures.

Conclusion

MiFID represents a fundamental shift in the European financial landscape, with profound implications for market structure, competition, and the strategic positioning of financial institutions. While it may seem daunting in the short term, it also presents opportunities for innovation and growth, especially for those who can adapt quickly and effectively. The long-term effects are likely to be more significant for exchanges and market infrastructures, as they face increased competition and regulatory scrutiny.