70 Minutes with Steven Maijoor

In retrospect, my discussion with Esma’s Steven Maijoor was more about politics than finance. But I guess that is to be expected – Esma is nothing more than a Pan-European institution. It shapes policy and ensures that all countries making up the European Union follow the collectively-decided rules.  

In that context, over the course of the interview, some interesting facts, plans and opinions for the state of the European financial markets came up. 

Market Europeanization: Broadly speaking, globalization, or better, the “Europeanization” of the financial markets is one of Brussels’ core goals. Maijoor himself referred to this notion several times throughout our interview, reiterating the necessity for harmonization of the trading process, a plan since disrupted by the UK’s decision to leave the Union. Hence, the European Commission has granted the Authority additional responsibilities, essentially weakening the supervisory powers of the National Competent Authorities (NCAs). And, although some MEPs believe this was the Commission’s response to Brexit, Maijoor insists this was simply a matter of practicality. “There are some issues that are purely European,” he said, citing data management and critical benchmarks as examples.

One Text to Rule Them All: Maijoor is confident that on January 3 next year, everything pertaining to the European capital markets will be working alright. His remarks regarding Mifid II implementation suggest that Esma will not be the bogeyman, although he is adamant it will also not tolerate non-compliance with the Directive. In some cases, for example the SI regime, the Authority has opted for a phased-in approach, which it deems necessary for its successful implementation, but other than that, Maijoor believes that four years’ preparation time was enough for all market participants. 

Conflicts of Interest: Because most things in Europe revolve around politics, the road to Mifid II was complicated not because Esma had to square different market functions, but because of conflicts of interest. There were a significant number of cases where Esma had to deal with intense lobbying from market groups and career politicians who opposed some of Mifid II’s most critical elements. WatersTechnology will report more on the topic soon, including Maijoor’s perspective. Mifid II, it seems, is set to go live the way it was intended. 

Systematic Internalizers: The SI regime was frequently brought up by Steven Maijoor during our discussion. I suspect that either it is an area that Esma sees as a critical element of Mifid II, or it is something the regulator is currently working on. SIs are the final piece of the legislation that takes effect nine months after the general implementation day, by virtue of its reliance on the Financial Instruments Reference Data System becoming fully functional. The regime introduces a new trading reality for the asset management community. 

No Overlapping Regulations: A recurring theme was the conflicting or overlapping nature of different mandates issued by the European Union. One example is the General Data Protection Regulation versus the transaction reporting rule, although Maijoor was clear that to the best of his knowledge, there was no conflict. He explained that “any piece of legislation that comes out of the Commission has been going into intraservices consultation,” meaning that it is “consulted” and compared with the other parts of the Commission.

CCPs Must Relocate: And not only CCPs, according to Maijoor. He thinks that Brexit puts the UK on the “third-country” list, making it imperative for firms to relocate to countries within the Union for the sake of efficient supervision. The Commission’s proposal, he said, for the relocation of CCPs needs to expand “to benchmarks, credit rating agencies and possibly also to trading venues.” 

In that way, domestic markets will not be affected by risks emanating from a market that Esma has no access to when the UK officially leaves the EU.