The European Parliament has formalised the delay of Mifid II this week, after hearing the infrastructure required for the legislation would not be in place by the current deadline.
The move pushes the implementation date back from next January to 3 January 2018.
In February the European Commission confirmed it planned to delay the deadline by 12 months, due to the “exceptional” challenges firms and regulators face in preparing for the new rules.
The Mifid II rules include a requirement to disclose all charges relating to a product to investors upfront, a different independence definition to the UK definition and tougher inducement rules.
The complexity of the legislation meant the parliament had already set an adoption period of 30 months, instead of the usual 18-24 months. But even with this additional time, parliament has stated that the “challenges are of such magnitude that essential data infrastructures will not be in place in time for 3 January 2017”.
IT infrastructure will need to connect data feeds between the European Securities and Markets Authority, local regulators, and more than 300 trading platforms across the European Union. A memo from Parliament said most IT systems connected to the legislation would need to be “built from the ground, based on new parameters”.
Without the appropriate data infrastructure it would not be possible to apply a number of the market rules under Mifid II, including requirements around transaction reporting, transparency framework, commodity derivatives and microstructural regulation.
Although some areas of Mifid II would not be affected by a lack of data infrastructure, such as investor protection and conduct of business rules, parliament was advised that a staggered introduction of the regulations would cause confusion and unnecessary costs.
In its proposed budget released this week, the FCA said IT expenditure would increase from £19.6m in 2015/16 to £22m in the year ahead, partly driven by costs associated with Mifid II.
Esma chair Steven Maijoor has previously said a 12-month delay to Mifid II may still not be enough time to allow the industry to prepare.