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Wednesday, 3 January 2018

MiFID II enters into force today

Welcome to the era of MiFID II: Today is the first day for banks and financial institutions in the European Union to operate under Markets in Financial Instruments Directive (MiFID) II laws. The new regulations force fund managers to pay for the research they use and requires investment banks to charge separately for research and brokerage services to avoid conflicts of interest. “They can no longer call up their favorite analyst for free for the lowdown on what stocks are hot or how the latest twist in Brexit negotiations will affect their portfolios. They may not even be able to access the hundreds of research reports that have long inundated their email inboxes daily unless they intend to pay,” according to Bloomberg. The new regulations are designed to clamp down on so-called dark pools — private markets that allow investors to buy and sell large blocks of shares without revealing beforehand the size of the orders or the price they paid.

Banks and asset managers across the European Union have spent more than USD 2 bn preparing for MiFID II and markets are worried about the implementation of the new regulations, the news website adds. Some are likening it to the Y2K moment of 1 January 2000, when many feared the transition into the new century would create havoc on computer systems around the world. “Whether there are IT malfunctions or not, trading volumes are projected to drop across Europe in January as everyone adjusts to the new MiFID world. Given the enormity of the changes, regulators aren’t likely to slap fines on companies for failing to be in full compliance, at least not at first.” Bloomberg gives a brief explainer here (runtime 01:35).

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