MiFID II is working

One year on, MiFID II is working and firms have adapted to the burdensome new set of rules. Markets have adapted to the new market structure rules, electronification has increased substantially in certain segments but market liquidity remains an issue. Licencing of data providers is in place, but a consolidated tape is still missing and a multitude of data formats makes the job undoable for the buy-side. The unbundling of research from execution continues to lead to rumblings among banks and asset managers, but is irreversible. The impact on SME research seems to be overdone. But the big question remains what Brexit will mean, if and when it happens.

Although very detailed, and predating capital markets union, it seems that MiFID II is an important step towards a more integrated capital market. Improved transparency towards non-equity instruments and more electronification should further increase market efficiency and integration, although the share of corporate bonds subject to transparency requirements is very low. As we discussed before, the further complexity of the rules seems so far to have contributed to transparency. Capital markets are composed of many different instruments, which need specific rules. To be followed up.

Karel Lannoo is General Manager of ECMI. This article is based on discussions during the ECMI seminar “MiFID II, One year on”, held at CEPS on 23 January 2019. Comments by speakers and participants are gratefully acknowledged.