Where do you think MiFID II has failed to achieve its goals (i.e. why is there a need for amendments)?

I believe that MiFID II is from a regulatory and client perspective a significant step forward compared to its predecessor. Regulators are provided with an extensive amount of additional information, which will enable them to perform their oversight tasks more efficiently. From client perspective, MiFID II has improved their situation by requiring more transparency and ensuring that clients understand the products they are trading in.

On the downside, the amount of information requested seems to be enormous. Especially around e.g. Best Execution reporting and the disclosure of end-client information to venues, the regulation seems to have gone overboard. More data does not necessarily mean more transparency; careful scrutiny is required to assess whether the implemented requirements are fulfilling their aim.

Some parts of the regulation do not seem to achieve their goal. Examples are Commodity Derivatives Position Reporting, which is mostly ignored by market parties, and Pre Trade Transparency for which market demand is still very low. Also, not all MiFID II parts have been fully clarified and/or implemented yet. The reliability of static data on which Transaction Reporting and Post Trade Transparency are based, is still below par.

Finally, regulators have been struggling themselves with the new regulation. Feedback provision has been slow and not always understandable/reliable. Submissions to FIRDS apparently have not been fully processed yet and reconciliation files are not delivered yet by most NCA’s. 

How do regulatory priorities coincide with operational priorities around technological advancements?

I have to say that in the eyes of most business representatives, regulatory priorities conflict with operational priorities around technological advancements. The proportion of change budget required to remain regulatory compliant seems to rise every year, reducing the available budget for anything else.

However, to be able to consistently meet regulatory requirements and expectations from the regulators, focus has to be put on how technology can assist. For Transaction Reporting, an ever-increasing amount of data is required from an ever-increasing amount of sources. Example is the complexity of a Transaction Report under EMIR, MiFID II or SFTR which is combining data across the organisation. Also, recently we received a regulatory request to reconcile trade information between prudential and transactional reporting; combining two worlds which until recently remained quite separated. Another example can be found in the use of pre-deal checking, to confirm regulatory compliance before a trade is initiated.

Without taking a holistic look, cost of compliance can easily grow out of proportion. New technology, often made available through RegTech companies, have the potential to play an important role going forward to help keep costs manageable. 

How much of the standardisation discussion is driven by regulatory changes?

Regulatory change can certainly be the driver for standardisation. One of the areas where MiFID II improved compared to MiFID I is to include Transaction Reporting in MiFIR; by taking out local reporting flavours, reporting quality and consistency is likely to be improved. Furthermore, regulations are often setting the bar for new standards by defining new reporting formats and data dictionaries.

Indirect impact of regulatory changes is to be expected as well. As argued in my answer to the previous question, internal standardisation is essential to be able to keep compliance costs down and remain competitive.

On that note, an area where I would welcome standardisation by the regulators is on disclosure of end-client information to venues. Currently, for any party involved in trading on multiple venues it is extremely hard to comply with this requirement, as processes, functionality, interfaces, specifications etc. all completely differ between venues. As long as this is the case, reporting quality is likely to suffer. 

What would you like to achieve by attending the Automation and Standardisation of Derivatives Trade Data and Reporting Conference?

I am very much interested in exchanging experiences on the early MiFID II days with other participants. I expect to find different views and interpretations on specific parts of the regulation, and I am curious how that impacted the implementations at other organisations.

I am also interested in the ongoing MiFID II challenges that people are experiencing, to set the agenda and priorities for the discussions that will undoubtedly be held within the industry in 2019.