Down the Mifid Rabbit Hole

Just as Alice had never seen a rabbit with a pocket watch, most industry veterans have never seen a directive with such a big and far-reaching impact as the E.U.'s Markets in Financial Instruments Directive (Mifid). The industry might not want to be here, but here it is, less than 135 working days away from Nov. 1.

Few firms have a clear plan of where they are and where they think they are going. Is this surprising? Not really, given the breadth of the challenge. The usual approach of sending change-the-bank contractors down the rabbit hole with their BlackBerrys will only add to the confusion and their Mifid isolation.

Financial institutions will not find solace from the regulators, who are struggling, as this month again saw rumors circulating as a result of more insufficient answers from the Committee of European Securities Regulators (CESR). The universal "known" is that nobody is going to give out the answers—few have them and fewer still are incentivised to collaborate at the detailed level required.

During the last 16 months, JWG-IT has defined over 1,000 Mifid requirements. Ongoing collaborative effort by the firms attending our workshops is now being channeled onto the "known unknowns" and the missing implementation detail across jurisdictions.

"The rabbit-hole went straight on like a tunnel for some way, and then dipped suddenly down, so suddenly that Alice had not a moment to think about stopping herself before she found herself falling down a very deep well."

These Mifid holes go deep underground. Firms will eventually need better tools. There are hundreds of technology vendors who can, and should, be working with the firms to design the right solutions. The point is this: Each Mifid journey has a different start and end point with different priorities along the way that are in a large part determined by existing operating models, but also by a firm's business objectives.

In the same way that Lewis Carroll invented imaginary creatures who satirized his friends and foes, many vendors and service providers have been morphing their existing products to sell as "Mifid solutions." Disappointingly, even at this late hour, many of these offerings are merely poorly thought-through press releases without the back-up of the investment required to navigate the new terrain.

The reality is just beginning to dawn on many marketing departments in technology companies that service E.U.-based financial institutions—Mifid is more of a winding journey than it is a burning opportunity. It will mean financial institutions and their suppliers embarking on a three- to four-year change program to transform and integrate disparate processes across the enterprise to unwind a labyrinthine warren into a manageable highway.

The FS Technical Special Interest Group, which was co-founded by JWG-IT, has aligned the interests of technology vendors and market centers, such as Aleri Labs, ASP-One, Atos Euronext Market Solutions, BEA Systems, Brookcourt Solutions, Chi-X, Cisco Systems, Intel, Kurtosys Systems, Oracle, Red Hat, Sybase and Xenomorph, to develop reference architectures that meet the E.U. regulation-driven needs of financial firms. The first outputs will be a Capital Markets Regulatory Framework, which defines Mifid solution requirements, and a Mifid test lab.

"'Oh, I've had such a curious dream!' said Alice, and she told her sister, as well as she could remember them, all these strange adventures of hers that you have just been reading about."

The complexity of the Mifid task is too great for most professionals in isolation and they need the full support of their supply chain partners. By bringing firms and vendors together, we can help in practical ways and facilitate the development of faster, better and cheaper solutions.

The roadmap to E.U. regulatory compliance indicates a bumpy road ahead and it is only by working out the terrain together and attending the tea parties along the way, that you can avoid a trip in the wrong direction.

"'But I don't want to go among mad people,' Alice remarked.

'Oh, you can't help that,' said the Cat: 'we're all mad here. I'm mad. You're mad.'

'How do you know I'm mad?' said Alice.

'You must be,' said the Cat, 'or you wouldn't have come here.'"

Different times call for different measures and there is relative sanity to be found in understanding the issues that you might face on your journey. The choice is yours: Mifid madness, or the path to Wonderland?

P.J. Di Giammarino is the founder and CEO of JWG-IT, a think-tank focusing on Mifid issues, and can be reached at

pj@jwg-it.eu.

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