Economy EU executive proposes delaying new securities rules until 2018

EU executive proposes delaying new securities rules until 2018

Tracey McDermott.
Tracey McDermott.

The European Union’s executive body proposed delaying the bloc’s sweeping reform of securities markets by a year to January 2018 on Wednesday, saying banks and regulators need more time to prepare.

The so-called MiFID II rules play catch-up with advances in trading technologies, increase transparency in bond and commodity markets, and apply lessons from the financial crisis such as requiring derivatives to be traded on platforms.

The European Commission said the well-flagged delay was due to exceptional technical challenges faced by regulators and traders in implementing the new rules, which will affect thousands of banks, brokers, fund managers and investors across the 28-country bloc.

More time was needed to allow regulators and banks to get their computer systems ready and to avoid legal uncertainty and potential market disruption, the Commission said in a statement.

The EU’s European Securities and Markets Authority (ESMA) had called for a delay.

While the Commission said the extension was strictly limited to the time needed to complete technical work, some EU states and European Parliament members hope the delay will make it possible to change contentious parts of the MiFID reform.

EU states and parliament must approve the proposed delay, and some lawmakers have said they would back a postponement in return for key changes to rules still being finalised to implement the reform.

France, Germany and Britain have raised concerns that too much transparency in bond markets could cause some investors to pull out and harm already stretched market liquidity.

Tracey McDermott, acting chief executive of Britain’s Financial Conduct Authority, which supervises the EU’s biggest financial market, has said MiFID II would unnecessarily impose trading curbs on hundreds of commodity derivatives contracts.

Introducing more transparency in bond trading should be phased in to give markets a “better shot” at adapting smoothly, she said last week.

The European Commission said ESMA has to collect data from about 300 trading venues on about 15 million financial instruments to make the new bond transparency, commodities position limits and other elements of MiFID work effectively.

ESMA Chairman Steven Maijoor has told Reuters that a one-year delay may not be enough if EU states and lawmakers begin haggling over remaining implementation measures.