For firms struggling with the magnitude of MiFID II, there is a way to approach practical implementation by dividing the requirements into three categories: first, what is known, second, where further guidance will be provided by the regulators, and third, where technology and the evolution of best practices will influence regulatory compliance standards.


Transaction reporting and trading mandate requirements


Broadly speaking, the pre, post-trade and transaction reporting, as well as the trading mandate requirements, are fairly detailed. Regulators have also provided a bit more clarity for these requirements than for others. It is expected that firms should be compliant in this area on day one.

Equivalence and even best execution could be seen as belonging to the second category, as regulators are expected to provide more guidance. For these requirements, firms should make assumptions in line with the spirit of the regulation.

Research belongs to the third category. Extraterritorial uncertainties remain, and the entire market is reshaping. More and more large buy side firms are opting to absorb costs, while smaller firms opt to use research payment accounts and charge their clients. In practice, for most of the two latter categories of requirements, firms will only need to take actions later in 2018. MiFID II is in fact more akin to a journey than an event.


Benchmarks throughout the year


For example, the first best-execution reporting period ends in April 2018, the double-volume cap on equity trades will be re-evaluated in June, transparency reporting will be impacted by the entry into force of the systematic internaliser declaration regime in September, and it’s not before the end of 2018 that firms will need to prepare a research budget. Firms will also need to review their processes to ensure regulatory reporting, data collection for best-execution reporting, clock synchronization and time stamping, as well as record-keeping in immutable storage, are being done correctly. Additional regulatory guidance is also expected throughout the year.

The deadlines for these actions are real. However, as long as firms are capturing the required data, the spacing of the compliance dates for the different categories gives them more time to get all their solutions and systems in place.