The European Commission has sent sections of Mifid II trading rules back to be rewritten saying the latest drafts are not “up to standard”.
The European Commission informed the European Parliament’s MiFID II negotiating team and Esma to revise the draft technical standards around the non-equity transparency, ancillary activity exemption and position limit rules.
European Parliament MEP and rapporteur for MiFID II Markus Ferber says: “I am glad to see that the European Commission takes the concerns of the European Parliament seriously. The latest drafts were far from being acceptable for the European parliament.”
In particular, he says the position limits regime “urgently needs a comprehensive redrafting”, claiming that neither ESMA nor the commission “have managed to deliver”.
Ferber says: “The latest drafts were just not up to standard. The commission is right to be afraid of the technical standards being rejected by the European parliament – hence, further work is necessary. I expect Esma to revisit those technical standards swiftly, thoroughly and to adapt them in line with the European Parliaments remarks.”
Sean Tuffy, head of regulatory intelligence at Brown Brothers Harriman, says despite the “growing disquiet” around MiFID II proposals from the industry and politicians, this move is surprising.
He says: “It opens up the possibility of another round of lobbying by the industry, which is something Ferber was wary of when he announced the implementation delay.”
The implementation date for Mifid II was originally January 2017, but has been delayed until January 2018 as the industry is not prepared.
Most recently senior officials at the European Commission said neither they nor the industry would be ready for January 2017.
However, Ferber has urged Esma that the latest redrafting of the rules should not lead to a further delay of the regulation.
He says: “The European Parliament’s concerns on this topic were known and available for quite some time. Therefore, Commission and Esma could have easily acted earlier.”
But Tuffy says: “Even with a delay to 2018, timing was going to be tight for implementation. This will add to the pressure and could lead to calls for a further delay.”
The Investment Association says it welcomes the move, particularly regarding the fixed income transparency rules.
Guy Sears, interim chief executive of the Investment Association, says: “Fixed income transparency rules are not dry technical issues, they impact the cost of debt financing on Europe’s bond market, where businesses raise money to support jobs, growth and innovation.
“We recognise that Esma has been tasked with a complex, even thankless, piece of work on technically difficult legislative requirements in a new area with imperfect data. Consequently, we will continue to offer technical assistance, which we shall also make available to the parliament and council, to assist Esma in any way we can.”