20 December 2011

EBF position on the review of the MiFID

EBF demands more signposting at Level 1 to ensure that important matters of principle are clear. Present uncertainty as to the timeline to implement any new changes needs to be addressed, and the banking sector should be given time to adjust efficiently.

The EBF understands the Commission’s intention in introducing a new category of Organised Trading Facilities (OTFs). OTFs should be regulated in way that permits OTFs and existing venues to compete fairly for business. Most EBF members consider, for example, that the OTF operator should not be prohibited from trading against proprietary capital as a service to clients.

The EBF supports the introduction of new organisational safeguards and risk-controls on investment firms engaged in “algo” trading and on trading venues (e.g. circuit breakers). The imposition of “market-making type” obligations on all “algo” traders will not prove effective, given the myriad of “algo” strategies used.

The EBF considers that the scope of non-equity instruments to which pre- and post-trade transparency requirements would be extended is too broad. The EBF suggests defining pre- and post-trade transparency requirements in a way that could be adjusted and calibrated, yet in a harmonised manner.

The EBF welcomes the introduction of more disclosure around the characteristics of the advice provided. The proposed labelling of different kinds of advice (i.e. independent versus non-independent) raises questions. The EBF considers that the proposal should stipulate in a non-equivocal manner that different kinds of advice may persist within one and the same financial intermediary.

The EBF is concerned that the catalogue of products that can be sold on an execution-only basis is too narrow. The EBF considers that an assessment of various elements – risk, complexity and liquidity – is necessary to properly determine the selling regime for each product.

The EBF considers it key that EU clients and counterparties have access to a full range of choice of EU and non-EU originated products and services. The EBF is concerned about the meaning of “equivalence assessment”. Any equivalence assessment of third country legislation should be a “top down” approach based on approximation in regulatory outputs, principles and objectives. Market access for EU banks to countries that have committed to a common set of regulatory principles for financial services reform (i.e. the members of the G20) should remain a primary policy objective in the review of MiFID.

Full paper

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