Even by the standards of post-crisis EU regulation, MiFID II is ambitious and expensive. A second deadline extension is needed, writes Brian Caplen.

The Banker runs a regular column called Reg Rage looking at different aspects of regulation and the financial sector’s frustration with it. Usually the temperature in our 'Rage' thermometer is raised to the level of anxiety or exasperation. But in the case of Markets in Financial Instruments Directive II (MiFID II), it went all the way to maximum Reg Rage.

This is hardly surprising. MiFID II is vast and touches almost every part of the financial business. One estimate puts the implementation costs at €2.5bn.

MiFID II is all about transparency and investor protection, and while these may be commendable goals, it is reasonable to ask whether a piecemeal approach might have been better.

Is the massive increase in required data for transaction reporting really necessary? The number of data fields that require filling is tripling, or quadrupling in some cases.

The implementation deadline has already slipped by a year to January 3, 2018, but reports from the market suggest that the industry is still struggling to be ready on time.

A survey of UK financial services carried out for voice security services company Aeriandi found that nearly one-quarter of respondents were unsure how MiFID II applied to their organisation. Seventy-three per cent of risk and compliance managers and 58% of IT managers were unaware of the fines that could be levied for non-compliance.

MiFID II stops the bundling by banks and brokers of trading and research costs but a poll of asset managers found that half had still not worked out how they will pay for research under the new rules.

Regulators are also overwhelmed by MiFID II and member states will be challenged to introduce the domestic legislation by the target date of July 2017.

After one deadline extension, the European Commission is not in a mood to allow a second, but there may be little choice. If regulators are unable to give the necessary guidance, it is hardly reasonable to expect the industry to get everything in place by early 2018.

Brian Caplen is the editor of The BankerFollow him on Twitter @BrianCaplen

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