Capco has published a joint white paper co-authored with HP on the Markets in Financial Instruments Directive (MiFD) entitled: "MiFD: A Smart Response".
The paper highlights the key changes to be introduced by MiFID and how this will impact financial institutions. The aper provides an initial response strategy that will help firms to deal with the challenges presented by MiFID, whilst at the same time ensuring that existing initiatives are aligned to avoid duplication of effort.
MiFID is the latest in a series of legislative changes that have been introduced by the European Union to create a more effective and integrated financial services industry. The aim of the directive is to increase the transparency of the European financial markets in order to protect the interests of investors. Additionally, the directive intends to reduce the differences between local market regulations allowing investment firms to benefit from opportunities to conduct business more easily across the whole European Community.
MiFID has a number of significant impacts, most notably:
• Increased scope incorporating more financial products;
• Increased rigour around client reporting and disclosure of fees and charges to clients;
• Significant requirements regarding order handling;
• Pre and post trade information publication obligations intended to increase market transparency.
• In handling the changes required by MiFID, the white paper stresses that it will be key for firms to adopt a smart approach:
• Create awareness of MiFID across the business;
• Put a program governance structure in place with sufficient representation from business, operations, technology and compliance;
• Review projects that are already underway in such areas as KYC and align overlapping requirements -- to ensure effective focus of effort and budget.
"The scope of the MiFID directive is far-reaching but, if approached systematically, there is no need for firms to panic," says Steve Webb, partner, Capco. "This is not a recommendation to be complacent, far from it. We feel that most firms need to address the issue with more urgency and focus. The key will be to get a clear initial assessment incorporating, business, operations and technology views and then align MiFID spending with other initiatives to maximise the benefit of what is, after all, mandatory spend in 2006 and 2007."
Simon Bennett, Managing Principal, Capco, adds: "Over the latter part of 2005, MiFID has generated an increasing amount of comment and interest and subsequently a greater awareness within the financial services industry. Much of the comment, however, has sensationalised the potential impact of this legislation leaving organisations with the daunting task of separating what they really need to know from the wealth of material currently available."
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