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MiFID II market rules deadline postponed until 2018

The European Commission has proposed a one year delay on the revised Markets in Financial Instruments Directive (MiFID II) to allow technical work to be finished in time.10 Feb 2016

If approved by national governments, the new deadline will be 3 January 2018. This takes account of the technical implementation challenges faced by regulators and financial firms, the Commission said

A "complex technical infrastructure" needs to be set up for the MiFID II package to work effectively, the Commission said. The European Securities and Markets Authority (ESMA) has to collect data from about 300 trading venues on about 15 million financial instruments, working closely with national competent authorities and the trading venues.

ESMA has predicted that neither the competent authorities nor the venues will have the systems that they need in place by 3 January 2017, the Commission said.

"In light of these exceptional circumstances and in order to avoid legal uncertainty and potential market disruption, an extension was deemed necessary," the Commission said.

The delay is "strictly limited" to allowing technical work to be finished, the Commission said.

Jonathan Hill, commissioner for financial services, said: "Given the complexity of the technical challenges highlighted by ESMA, it makes sense to extend the deadline for MiFID II. We will therefore give people another year to prepare properly and make the necessary changes to their systems. Meanwhile, we are pressing ahead with the level II legislation to implement MiFID II and expect to announce those measures shortly."

Financial services regulation expert Michael Lewis of Pinsent Masons, the law firm behind Out-Law.com said that the delay "comes as no surprise but is to be welcomed as it gives firms a more reasonable time frame to prepare their systems once the final rules are agreed."

"The delay in the implementation should not be interpreted by firms as an opportunity to stall their MiFID II projects – if anything, it underscores the enormity of the regulatory challenges that lie ahead for firms," Lewis said.

Steven Maijoor, ESMA chairman, told the European Parliament's Committee on Economic and Monetary Affairs (ECON) in November that it was now "unfeasible" to meet the timetable for many of the reporting requirements due to the difficulty investment firms face in adapting their IT systems in time.

"The building of some complex IT systems can only really take off when the final details are firmly set…and some of the most complex IT systems would need at least a year to be built," Maijoor said. "We have therefore raised these timing issues with the European Commission, and the fact that some IT systems will not be ready in January 2017, and the uncertainty this will create as they are needed for the execution of certain elements of MIFID II."