1. MiFID : Beyond Implementation
Sofia, Bulgaria

2. Overview MiFID post-implementation MiFID reviews Further developments
MiFID enforcement/application
Impacts of MiFID
Market changes
MiFID reviews
Non-equity transparency
Commodity derivatives
Other reports
Further developments
The international dimension
Financial turmoil

3. MiFID Transposition checking
Core Commission function (Level 4 Lamfalussy)
First phase: completeness check
Have the provisions been implemented?
State of completeness check shown in the ‘Lamfalussy league table’ on COM’s website
Second phase: quality check
How have the provisions been implemented?
We intend to consult with trade associations
Ask them to identify known instances of inconsistent application or transposition
Help us to focus on real, practical issues

4. Intended impacts of MiFID
A catalyst for significant innovation and market structure changes
Increase competition between trading venues and cross-border
Increase trading volumes and financial information flows
Will make full electronic trading more attractive
Create deeper, more liquid integrated capital markets
Lower costs for issuers and investors

5. Market changes so far Very encouraging
A range of new trading venues and services have already been announced
Trading: Project Turquoise, Chi-X, Equiduct, SmartPool, Plus Markets, etc…
Existing exchange services upgraded (cheaper, faster)
New trade/transaction reporting services : Markit Boat, Omgeo, ICMA TRAX2, LSE, Reuters, Deutsche Börse, etc…
Other services for firms to assist in compliance/service delivery
Consolidation among major exchanges picks up pace
LSE-Borsa Italiana
NYSE-Euronext
Nasdaq-Dubai-OMX

6. Non-equities market transparency
Detailed transparency provisions apply to shares only
Trading venues (regulated markets, MTFs and systematic internalisers)
Firms subject to post-trade obligations for OTC trades
Pre-trade exemptions available e.g. crossing networks
Delayed publication of post-trade information possible for large trades under a ‘sliding scale’
Article 65(1) MiFID – Commission to report on whether to extend beyond shares

7. Non-equities market transparency
Report published 4 April
No need to extend MiFID beyond shares
Market best placed to address concerns re retail access to bond prices
Self-regulatory solutions from ICMA and SIFMA
COM will monitor developments

8. Commodities review – main issues
Exemptions for non-investment firm commodities companies Articles 2.1.i, 2.1.k
Parallel exemptions for commodities houses from Basel II rules
Scope of Market Abuse Directive
Third Energy Package (September 2007)
Review of transparency for spot and derivatives
Review of record-keeping for spot
Reports due mid and end-2008

9. Commodities - issues at stake
Level playing field
Between businesses dealing in same instruments
Between Member States (uneven transposition)
Appropriate level of regulation for commodities business
Prudential (less systemic risk)
Conduct of business (little retail involvement)
Benefit of greater transparency in energy?

10. Some early messages Early consensus on: Timetable
Need for exemption for own-account hedging
Need to avoid extending financial regulation to physical market (retain MiFID definitions of financial instruments)
Timetable
Mandates due mid-2008
Public hearing 25 September 2008
Report end-2008

11. Other MiFID reports Report Legal base Initial Date
Transparency Extension L1 Art /10/2007
Article 27 Mifid L1 Art /10/2008
Consolidation of information L1 Art /4/2008
Best Execution data L2 Dir. Art /10/2008
Block Trades L2 Reg. Art /10/2009
Definition of transaction
criteria for liquid shares L2 Reg. Art At least every two years
Tied agents L1 Art c) 30/4/2008
Telephone recording L2 Dir /12/2009
 New target date: one single report – mid 2010

12. International dimension
Why ?
Globalisation: trade, investment and capital movement are booming
More efficient global allocation of capital
Avoid spillover effects of legislations
Promote EU regulatory model
Support global expansion of EU FS industry
Convergence towards international standards
Have an offensive position in multilateral or bilateral negotiations

13. International dimension cont.
How ?
Informal regulatory dialogues : Commissioner and DG level
With Min Fin, Central Banks and regulatory agencies
US: Started in 2003 with SEC, FED and Treasury
SOX, deregistration, reinsurance collateral
Basel II, audit et accounting
Japan et China : started in 2005
Russia et India : started in 2006

14. International dimension cont.
Results
US: Deregistration, accounting road map, Basel II, 1st step for audit oversight equivalence
China : retail banking market opening, accounting convergence
Japan: convergence between Japanese GAAP and IFRS
Russia : approximation of EU legislation, preferential access for EU companies
India : exchange of information, follow-up of FS liberalisation

15. Mutual recognition G7/G8, SEC have both raised this possibility
We are strongly supportive, so long as our ‘red lines’ are maintained:
Open and transparent criteria for granting of market access
COM plays the leading role for EU
EU States to grant market access only to firms/exchanges from comparably regulated jurisdictions
EU rules apply to EU financial markets
No regulatory spill-overs

16. Mutual recognition with the US
Joint SEC/COM statement on 1/2/08
Issues to be clarified
Mutual recognition process – allocation of responsibilities between COM, SEC, CESR
Principles
Scope (entities, products, investors)
Mutual recognition in practice (MoUs)

17. Implications of financial instability for financial regulation
Important to have a globally convergent approach to regulation
Importance of lifetime financial education
Risk transfers sometimes not effective
More work needed on capital calibration for complex products and on banks’ ability to identify risk concentrations
Role of credit ratings agencies

18. More information Commission MiFID web pages: tinyurl.com/yyulyz
MiFID texts, transposition info, Q&A
CESR MiFID databases: mifiddatabase.cesr.eu
CESR MiFID Level 3 (guidance): tinyurl.com/2bj2oq

19. Thank you