Panel: Europe Lagging in Mifid Preparedness

The majority of European member states are behind schedule for transposition of the Mifid requirements, says a panel participant who spoke during SunGard's European user conference, SunGard Europa, last week. The participants decline to be indentified. "Things will go into place in 2008 rather than on November 1," the panelist adds.

There is still a "high uncertainty" in the industry when it comes to Mifid, according to a second panelist, whose organization conducted a 10-week study involving 178 investment firms and exchanges in Germany that ended February. The survey revealed that 53 percent of the respondents are very familiar with Mifid and 30 percent said that Mifid is "mostly known" by them.

Mifid is becoming increasingly known within firms in Germany when compared to the numbers from the 2006, says the second panelist. Last year, 43 percent of the firms surveyed said that Mifid was "mostly known" to them and 41 percent revealed that they were "still collecting information" concerning Mifid.

There was a "clear improvement" in comparison to the first stage of the study: Seventy-six percent of the firms have addressed the project planning, versus 37 percent in 2006; and 66 percent have analyzed the impact of processes and IT—50 percent last year, according to the second panelist. "Nevertheless, there is still a long way to go before Mifid readiness will be achieved," he added. Those respondents who have not started implementation totals 56 percent, while 68 percent of respondents have not specified internal and external personnel capacities, according to the second panelist.

Mifid is still regarded by the industry as a regulatory obligation, rather than a strategic opportunity, says the second panelist. However, Mifid represents an opportunity for the market to develop and those to be affected by the regulation will need to understand the market changes to beat competition, adds the first panelist.

The success of Mifid depends on Project Turquoise, a Mifid-inspired multilateral trading facility (MTF), adds a third panelist. If the bank-led consortium does not work, other firms will be discouraged from trying to build similar initiatives, says the third panelist. It is difficult to achieve execution with reduced costs creating fierce competition: Those who fail to adapt to market competition will likely suffer, adds the first panelist.

SunGard has recently launched a Mifid Hub solution to help firms to meet the increased recordkeeping requirements imposed by Mifid (DWT, April 2). "Part of the platform was pre-existing and we changed the ability to quote in the internal market using Front Arena or another system, so customers can maintain their liquidity pool and maximize internalization opportunities," Colm Furlong, equity specialist with SunGard Front Arena, said at that time.

In order to clarify the best execution requirements under Mifid, the Committee of European Securities Regulators (CESR) published a question-and-answer (Q&A) document two weeks ago. The document is part of the last set of guidelines to implement the new trading regime in Europe, which includes recommendations on passporting and protocol on notifications, recommendations on inducements and guidelines on transaction reporting (DWT, June 4).

The second panelist considers this an important step toward the establishment of a harmonized vision of Mifid. Although regulators have been cautious to deliver technical advices, the commission is encouraging them to present approaches to apply the legislation.