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MiFID II: Turning regulatory challenges into business opportunities

The changes brought about by the Markets in Financial Instruments Directive II (MiFID II) and Markets in Financial Instruments Regulations (MiFIR), can have operational and revenue effects on investment firms.

Overview

When we add to this the regulatory requirements of other regimes like Basel II, Capital Requirements Directive and Dodd-Frank to name a few, investment firms will need to consider a comprehensive, holistic approach to regulatory transformation.

Though MiFID II represents a considerable challenge, it also represents a significant opportunity for firms to improve their organization and their way of doing business. In this Accenture Finance & Risk Services report, we explore this topic and present a perspective on how to seize this opportunity.

Background

MiFID II/MiFIR is an EU regulatory framework consisting of a revised directive (MiFID II) and a new regulation (MiFIR) aimed at increasing investor protection by creating a more efficient, risk-aware and transparent market for investment services and activities.

The full regulatory impact for investment firms is expected to begin in 2017, after the transposition of the provisions into national law by EU member states and Switzerland. Despite the two-year implementation period, the burden on investments firms is significant, as MiFID II has wide implications for their operating and business conduct models.

Analysis

A high-level assessment of the rules has identified three key challenges:

  • Challenge 1: Investor protection - Provisions for investor protection covering the entire lifecycle of investment products and services. We believe that this will require firms to reshape their business models and cope with major new demands.

  • Challenge 2: Pre- and post-trade transparency - Provisions for pre- and post-trade transparency strengthen and extend the trading and disclosure requirements for all forms of trading and all asset classes. Our perspective is that companies need to take appropriate steps to master the greater transparency requirements demanded by MiFID II/MiFIR.

  • Challenge 3: Internal organizational set-up and risk control - Provisions for internal organization set-up and risk control give more weight to risk control and the firm’s supporting internal control function. From our observations, an enhanced Risk Control Framework can be implemented for regulatory compliance.

Recommendations

We believe that the key components for a favorable and timely implementation of MiFID II are:

  • A clear strategic vision of the future operating model.

  • A detailed action plan for implementation.

  • A dedicated team of specialists.

  • Clearly defined roles and responsibilities for execution.

  • An end-to-end perspective, from identifying the business implications of MiFiD II to analyzing the interdependencies of requirements with other global and EU regulations to identify synergies.

Organizations should consider tackling MiFID II implementation as a change program that can have far-reaching implications across various areas.