Feeds

MiFID: Financial borders fall but small firms must beware

Minnows won't benefit much

Internet Security Threat Report 2014

Pan-European regulation of large sections of the financial services sector comes into force today, but the benefits of the system will largely pass smaller firms by, according to the British Banking Association (BBA).

The Markets in Financial Instruments Directive (MiFID) is a European Union directive aimed at allowing financial services firms to compete across Europe's borders. It says that financial services firms should be able to operate across Europe as long as they are accredited and regulated in their home country.

The UK is one of only three EU nations to have met the deadline for turning the Directive into law of 31 January 2007, and the law comes into force today.

The BBA warns, though, that only the bigger financial institutions will realistically benefit from the change. "Smaller financial institutions, particularly non-banks, will be less well-placed to derive any significant benefits from MiFID," said the organisation in a statement. "The high implementation costs needed to maximise their opportunities may exclude them from changes for the moment."

The BBA said the companies most likely to benefit are larger firms, who have an opportunity to increase the size and scope of their business.

"Large banks and exchanges are best placed to benefit for the coming changes. Many of them have followed the negotiations closely and have well-developed project teams in place. The bigger the bank, the lower proportionately are the implementation costs."

The change will affect all financial services firms offering services such as share trading and investment advice, whether they want to trade across Europe or not. Financial regulator the Financial Services Authority (FSA) is changing its Handbook of rules governing financial services to take account of the new law, which means that all firms subject to MiFID will have to change their practices.

According to the FSA, this includes firms such as investment banks, portfolio managers, stockbrokers and broker dealers, corporate finance firms, many futures and options firms and some commodities firms.

A recent survey revealed that 64 per cent of firms in the UK are struggling to cope with the demands of the new rules. Think tank JWG-IT said that that proportion of financial services firms are finding it hard to cope with requirements to keep records in a different way. The new rules demand that files are kept for five years after an event, and for the duration of the relationship with a client and sometimes longer.

The new law replaces laws deriving from the Investment Services Directive, which is being repealed.

Only the UK, Ireland and Romania have managed to meet the deadline of 31st January for implementing the Directive, though most others have implemented it since then. Spain and Poland will not be compliant before today’s deadline, the European Commission has said.

The BBA said that the changeover to the new rules has already cost the financial services sector significant sums of money. "This week sees the culmination of many years of very hard bargaining by virtually everyone who has ever taken an interest in financial services," said BBA executive director for wholesale banking Micahel McKee. "The major European financial firms have already spent some years and millions of pounds preparing for this change, but as with all change there are likely to be some winners and losers."

McKee said that the UK was, though, better placed than most places to take advantage of the changes and the potential increase in the number of markets available to firms. "London is the world's financial capital – its concentration of expertise, experience and financial acumen put it in pole position to reap the benefits of this harmonisation in the future," said McKee. The BBA said that all is not lost for smaller firms. Those that embrace the change could benefit, it said. "Smaller banks will reap the best benefit from MiFID by using it to differentiate their service offerings from their competitors," said the BBA statement. "Private banks will, however, be pressed to combine the new regulatory requirements with their traditionally bespoke services to clients."

Copyright © 2007, OUT-LAW.com

OUT-LAW.COM is part of international law firm Pinsent Masons.

Reducing the cost and complexity of web vulnerability management

More from The Register

next story
Phones 4u slips into administration after EE cuts ties with Brit mobe retailer
More than 5,500 jobs could be axed if rescue mission fails
JINGS! Microsoft Bing called Scots indyref RIGHT!
Redmond sporran metrics get one in the ten ring
Driving with an Apple Watch could land you with a £100 FINE
Bad news for tech-addicted fanbois behind the wheel
Murdoch to Europe: Inflict MORE PAIN on Google, please
'Platform for piracy' must be punished, or it'll kill us in FIVE YEARS
Phones 4u website DIES as wounded mobe retailer struggles to stay above water
Founder blames 'ruthless network partners' for implosion
Found inside ISIS terror chap's laptop: CELINE DION tunes
REPORT: Stash of terrorist material found in Syria Dell box
Sony says year's losses will be FOUR TIMES DEEPER than thought
Losses of more than $2 BILLION loom over troubled Japanese corp
Show us your Five-Eyes SECRETS says Privacy International
Refusal to disclose GCHQ canteen menus and prices triggers Euro Human Rights Court action
prev story

Whitepapers

Providing a secure and efficient Helpdesk
A single remote control platform for user support is be key to providing an efficient helpdesk. Retain full control over the way in which screen and keystroke data is transmitted.
WIN a very cool portable ZX Spectrum
Win a one-off portable Spectrum built by legendary hardware hacker Ben Heck
Saudi Petroleum chooses Tegile storage solution
A storage solution that addresses company growth and performance for business-critical applications of caseware archive and search along with other key operational systems.
Protecting users from Firesheep and other Sidejacking attacks with SSL
Discussing the vulnerabilities inherent in Wi-Fi networks, and how using TLS/SSL for your entire site will assure security.
Security for virtualized datacentres
Legacy security solutions are inefficient due to the architectural differences between physical and virtual environments.