2019年-CEPS欧洲政策研究中心_MiFID_II_is_working_2页_747kb

MiFID II Summary: One Year On

Core Content

MiFID II, the Markets in Financial Instruments Directive II, has been in effect for one year as of February 2019. The directive has undergone a lengthy and costly implementation process, with many technical standards delayed until the final stages. Despite these challenges, the markets have adapted to the new regulatory framework, and the directive is now functioning as intended.

Main Points

• Market Adaptation: Firms across the EU have adapted to the new rules, and market structures have evolved accordingly. Systematic internalisers (SIs) have gained prominence, replacing traditional broker crossing networks and off-exchange trades. SIs accounted for 13% of trades in 2018, up from 1.4% in 2017.

• Market Liquidity: While electronification has increased in certain segments, market liquidity remains a challenge, particularly in less liquid markets.

• Product Electronification: MiFID II has driven significant electronic trading in non-equity markets, such as ETFs, government bonds, corporate bonds, and interest rate swaps. This has enhanced price discovery, trading efficiency, and regulatory oversight.

• Transparency and Data: Transparency in market data has improved, with data becoming available free of charge after 15 minutes. Accuracy in SI and OTC trade reporting has also increased. However, the availability and quality of data are still seen as below expectations. A consolidated tape is yet to be implemented, and the high cost of market data from national exchanges remains a key barrier.

• Data Licensing: The licensing of data providers is now in place, but the absence of a consolidated tape makes data integration difficult for buy-side firms.

• Research Unbundling: The unbundling of research from execution has been a contentious issue. While it has led to some concerns among banks and asset managers, it is considered irreversible. The impact on SME research has been overblown, with 80% of asset management companies internalising research costs. Research budgets for French firms, for example, declined from €38m in 2016 to €34m in 2018.

• Corporate Bonds: One of the key weaknesses of MiFID II is its limited application to corporate bonds, which are often accessible to retail investors. According to ESMA, only 470 liquid bonds (including government and public bonds) are covered under MiFID II rules, indicating a significant gap in transparency for corporate bonds.

• Brexit Uncertainty: The potential impact of Brexit on MiFID II remains a critical unknown, as the directive's implementation could be affected by the UK's exit from the EU.

Key Information

• Regulatory Impact: MiFID II comprises 800 pages of text and 37 pieces of secondary legislation, making it one of the most comprehensive financial regulations in the EU.

• Market Structure Changes: SIs have become a more prominent feature in off-exchange trading, offering a more tailored service to clients seeking to minimize market impact.

• Regulatory Oversight: The directive has enhanced transparency and regulatory oversight, particularly for non-equity instruments. However, the lack of a consolidated tape continues to be a major limitation in achieving full market integration.

• International Trends: The unbundling of research from execution is gaining traction internationally, with the US also reportedly considering similar measures.

• Future Considerations: There is a growing expectation that regulators may take radical steps to create a consolidated tape in the European equities market. Further complexity in the rules is seen as a double-edged sword, contributing to transparency but also increasing regulatory burden.

Conclusion

MiFID II has made a significant impact on the EU financial markets, promoting transparency, electronification, and market efficiency. While challenges remain—particularly in the areas of corporate bond transparency and the absence of a consolidated tape—the directive is considered a step towards a more integrated capital market. Its long-term success will depend on continued regulatory efforts and the resolution of outstanding issues such as data costs and the impact on SME research.