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MifID II/MiFIR RTS has landed

As promised, ESMA has published final draft MiFID II/MiFIR  regulatory and implementing technical standards. In case regulatory teams weren’t already reeling from the 552 pages of the MiFID II RTS, ESMA also published technical standards for  MiFID II interdependent MAD/MAR and CSDR, making a total of 2505 pages of which every word will be pored over. ESMA chief Steven Maijoor provided the following takeaway,

“The rules put out by ESMA today on MiFID II, MAR and CSDR will notably change the way Europe’s secondary markets function. And this will no doubt impact market participants and regulators alike. The magnitude of this change should not be underestimated. But the past has taught us that change is needed in order to make markets more transparent, efficient, and safer to invest in. This will entail a certain cost but we should not forget the other side of this equation, which is the great benefits safer and sounder markets will bring to everybody.”

When European technocrats caution their audience not to underestimate the magnitude of change, we may be sure that a hurricane is on the horizon- the MiFID “twins” are the most fundamental and wide-ranging  financial regulatory reforms since the creation of the EU; the publication of the final draft marks the formal beginning of their implementation phase. On a very brief reading, stakeholders will be reassured to see that the RTS contains no major changes in the vital areas of client ID and transaction reporting; referring to a reduction in commodity limit thresholds, Maijoor called it “The most important change from earlier versions”.  While in reality, banks, vendors and national regulators have already made advanced plans based on Level 1 text and earlier iterations of the draft RTS, the degree to which the final draft differs from its earlier incarnations will decide how much of this work has been in vain. In-depth analyses will be published on the DRS site over the next few weeks.

RTS publication only goes so far in clearing the fog of uncertainty, implementation details largely await publication of delegated acts in December, and adoption of the RTS final draft is by no means certain. The three RTS sets have been sent to the European Commission, whose nation state members have three months to object. If the RTS is adopted without changes, the Parliament or Council have a one-month objection period, which may be extended by a further month. If the Commission does not endorse the RTS in full, ESMA then has six weeks to respond or amend. Amendment or rejection triggers a longer objection period in the Council and/or Parliament, three months which may be extended by another three. Irrespective of any minor timeline alteration, RTS publication moves  the ticking clock from audible to deafening.

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