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MiFID II Implementation - Are you ready?

1st July 2017

Are you Ready for MiFID II?

The implementation date for the revised Markets in Financial Instruments Directive (MiFID II) is fast approaching. Firms now have less than 6 months to ensure they are prepared and ready for implementation on 3rd January 2018.

MiFID II: Recap on the European legislative process

As most of you will know by now, MiFID II has two levels of European legislation.

Level 1 Legislation: MiFID & MiFIR

Level 1 – the MiFID II framework was agreed back in 2014 and consists of two connected pieces of legislation – a revised Directive (MiFID) and new Regulation (the Markets in Financial Instruments Regulation ‘MiFIR’). Directives must be integrated into the National Legislation of all EU Member States, whilst EU Regulation will apply directly to those within Member States.

Level 2 Legislation: Delegated Acts & Technical Standards

The Level 1 legislation will then be supplemented by various implementing measures - or ‘Level 2’ legislation - that will take the form of either ‘Delegated Acts’ or ‘Technical Standards’.

Delegated Acts are drafted by the European Commission (EC) on the basis of advice by the European Securities and Markets Authority (ESMA), whilst Technical Standards are drafted by ESMA and approved by the EC.

UK Measures: MiFID II

In the UK, the Financial Conduct Authority (FCA), in discussion with trade associations and HM Treasury are discussing how best to implement MiFID II. The deadline for the UK to adapt domestic laws and regulation ready for MiFID II is 3rd July 2017, thus this month the final rules for MiFID II will be made available to firms by the UK regulator.

However, remember it is only the revised Directive that needs to be integrated into national legislation whilst much of the MiFID II framework take the form of new Regulation (MiFIR) that applies directly to firms in the UK without the need for integration into domestic laws and regulations.

MiFID II: Effect on Investment Firms?

Investment firms must already provide notice to the FCA of events and information that are required for the regulator to honour their obligations under the Financial Service and Markets Act (FSMA).

Under MiFID II firms authorised as Investment Firms will see changes to the notifications they are required to make that will affect the following areas:

 Algorithmic trading;

 Direct electronic access provision;

 Changes to the membership of the management body; and

 Intention to act as a general clearing member.

Are you ready for MiFID II?

With MiFID II’s implementation date of 3rd January 2018 fast approaching, firms should now be on their homecoming stretch with regards to preparations for the new regime.

Whilst the final set of rules have only recently been published by the regulator, the FCA published their first set of finalised MiFID II rules back in March. In addition, the FCA has continuously stressed, both last year and since the start of this year, that firms must not wait until all finalised rules have been published to begin making their MiFID II arrangements to ensure their timely compliance.

MiFID II: Applications & Variation of Permissions

In January 2017 the FCA invited firms to start submitting their applications for authorisations and variation of permissions. Firms within the scope of MiFID II are strongly encouraged to submit all applications by 3rd July 2017 to give enough time for authorisations to be approved by January 2018.

MiFID II: Passport Notifications

Later this month on 31st July 2017, the FCA will open the appropriate gateway to all firms looking to submit passport notifications for MiFID II to the regulator.

The FCA have advised that all MiFID II Passport Notifications must be made by 2nd December 2017 in order for firms to be compliant by the 3rd January 2018 Implementation Date.

MiFID II: Key dates for Firms

Remember, it is your responsibility to ensure you apply in good time and have the necessary authorisations and permissions in place to operate under the new MiFID II regime.

Firms will need to demonstrate how they will meet all Prudential and Conduct of Business both initially upon implementation and on an ongoing basis.

Some of the key dates that Firms need to be aware of are:

June 2017:                 FCA expected to publish its second Policy Statement (and final rules) on the Implementation of MiFID II

1st June 2017: Application Deadline for Bond and Derivatives waiver

3rd July 2017:           Passporting Gateway to be opened by the FCA

31st October 2017:     Deadline for exiting operators of Multi-Lateral Trading Facilities (MTFs), including Recognised Investment Exchanges (RIEs), to provide the information required under the operation of MTFs under Implementing Technical Standards (ITS) 19 and any application to register an MTF as an SME growth market.

2nd December 2017:  Deadline for Notification of Cross-Border Passports

3rd January 2018:     The date for New notification forms for investment firms; Application for Change in Legal Status; Requirements for existing firms to notify the FCA of changes to the management body using the form in Annex III to the authorisation ITS; Application of new fee blocks;

Deadline for annual notification for commercial firs trading on commodity derivatives or emission allowances and benefiting from the Article 2(1)(j) exemption.

MiFID II Support:

As mentioned, firms should have started to identify the changes relevant to their business that MiFID II introduces. However, if you feel you are a little behind with your preparations or would like support in completing your MiFID II gap analysis or preparing any relevant applications and notifications before the deadlines, please contact our regulatory support team who would be happy to help.

As a reminder, failing to obtain the correct permissions or passports before MiFID II is implemented on 3rd January 2018 may mean that your firm is prevented from conducted regulated activities or providing cross border services.

Read our latest articles, news and views affecting compliance and regulation in the UK Financial Services Industry.