A meeting hosted by the Financial Conduct Authority, the UK regulator, warned that a delay in the implementation of MiFID II will not solve the problems in the quality of data needed to comply with the new European regulations covering financial markets.

The FCA held a roundtable for trade associations on MiFID II implementation on 6 January 2016 and published the minutes today.

“The challenge of the lack of quality data for the application of various provisions in the legislation including pre and post-trade transparency was noted by one association,” said the minutes. “Even if there was to be a delay to the date of application, that would not solve these data problems.”

The legislative text says MiFID II is due to come into force in January 2017 but the European Securities and Markets Authority has asked for a delay of one year. The regulator’s request has to be approved by both the European Parliament and Council, which could happen this month.

The minutes said: “The FCA stated that although there had been significant public discussion of MiFID II’s date of application, there had not been the same discussion of other dates in the legislation and it was therefore not clear if these dates will also change. These dates include matters such as the consolidated tape for non-equities, and transitional provisions for access.”

The UK regulator said some smaller firms may be falling back on their MiFID II preparations although larger firms are continuing as they realise the scale and extent of the work required for readiness.

“The FCA noted the importance of keeping the momentum going, despite the potential delay and said it was considering how it could best communicate that to market participants,” the minutes added.

Cian Ó Braonáin, global lead of Sapient Global Markets’ Regulatory Reporting practice, said in on the consultancy’s blog that the word “delay” is dangerous because it tempts firms to stop their projects while they wait for a new deadline but that would be a  mistake.

“If you put aside tools until March or such time when an announcement is made, then you run the risk of having to deal with some significant problems further down the line,” added Ó Braonáin. “Keep in mind that an additional year will mean heightened scrutiny.”

He warned that if there is a delay regulators will be less tolerance of failures to complete projects, prepare documentation or report in the correct and timely manner will be significantly reduced.

“Your firm will be expected to have implemented and tested a robust solution, and any non-complaint firms will likely be fined at an earlier stage compared to the grace periods offered on previous regulations,” said Ó Braonáin.

Simon Lovegrove, head of financial services knowledge – global at Norton Rose Fulbright, highlighted some points from the FCA roundtable on the law firm’s blog. Lovegrove noted that the FCA expects greater clarity on a possible delay to the date of application for the whole of MiFID II during this month; that it is unclear if a delay will include changes to the legislative text for MiFID II and whether the European Commission will propose a delay to the transposition deadline of 3 July 2016 when EU regulations have to be included in member states’ own legislation.

The FCA said it would seek to provide clarity on the MiFID rules to those impacted as soon as possible and will provide them with an adequate time to complete their implementation work.

Featured image via Dollar Photo Club