Regulatory compliance: MiFID II solutions

We have the solutions you need to address your MiFID II requirements.

The timeline for compliance with MiFID II – Europe’s second Market in Financial Instruments Directive – is urgent, with an effective date of January 3, 2018. Whether you are a buy-side or sell-side professional, IHS Markit can guide you to:

  • Conduct sophisticated benchmarking to improve best execution and transaction cost analysis
  • Manage the process of evaluating, utilizing, and paying for research
  • Comply with wide-ranging transaction-reporting requirements
  • Adapt to the changing economics of securities trading
  • Efficiently manage regulatory outreach and data exchange with counterparties

Latest updates on MiFID II – see our IHS Markit Newsroom.

Quick links:

 

Find a solution by MiFID II objective

Transparency Governance Market Structure Investor Protection

 

Hear our thought leaders discuss MiFID II

RTS 28 - More to compliance than meets the eye

What are the key challenges firms will face to address MiFID II?

How can you effectively manage outreach and repapering strategies?

Data management challenges posed by MiFID II reporting rules

Advice for the buy-side on best execution under MiFID II

Need a solution for the research payment process under MiFID II?

 

For more insights, please visit our MiFID II Video Gallery.

 

MiFID II Summary

In 2004, the European Community adopted the first Market in Financial Instruments Directive (MiFID I), which aimed to create a single European market for investment services and activities. Whereas MiFID I strove to create a single European equities trading market, MiFID II developed in response to the 2008 financial crisis. The legislation will extend and reform the original MiFID framework to the non-equities markets: derivatives, foreign exchange, cash, commodities and fixed income assets. Trades of all equity and non-equity assets will be required to occur in open, transparent trading venues. Execution of MiFID II is slated for January 3, 2018.

What are the goals of MiFID II?
  • Improved, efficient market structure
  • Greater market fairness and transparency
  • Stronger investment protection
  • Reduced systemic financial risk
  • Level playing field for market participants
IHS Markit MiFID II solutions: Gain a competitive advantage
  • Fast, cost-effective: Implement our solutions immediately, eliminating the need for costly development work
  • Comprehensive: Find all the answers you need to meet your regulatory requirements in one place with products that work seamlessly together or work independently
  • Customer-designed: Find solutions that have been developed directly with customers like you to meet your needs and goals
  • Transparency: Get complete visibility of your workflow across the trading value chain
  • Maintenance-free: Receive automatic updates that reflect any new regulatory requirements
  • World-class: Go beyond simple adoption to using solutions that have the latest evaluation metrics and functionality and will serve as a competitive differentiator
Why choose IHS Markit as your solutions provider
  • We have longstanding industry relationships with the top sell-side, buy-side and regulatory institutions, serving more than 3,500 of the world's largest institutional customers, including banks, hedge funds, asset managers, regulators, auditors, fund administrators and insurance companies
  • We have more than a decade of experience providing effective regulatory solutions for the financial service industry, from EITF 02-03 to MiFID, Dodd Frank, EMIR and now MiFID II and MiFIR
  • We have one of the broadest solutions set for MiFID II requirements, spanning all key requirements for the three core MiFID II objectives: Investor protection, transparency, market structure
  • Our solutions have always harnessed the latest technology to provide the functionality our customers need to adapt and perform – We are currently investing in next-generation initiatives such as blockchain, microservices and Symphony to help power the solutions of the future

 

Resources: Independent research, blog entries and more on MiFID II


MiFID II’s Buy-Side/Sell-Side Standoff: The Good, the Bad and the Ugly


RTS 28: More to Compliance than Meets the Eye


Fighting the Paper Tiger: The challenge with MiFID II Repapering


MiFID II and Trade Reporting: Get Ready for Big Changes


29 September 2016: MiFID II to cost
financial industry $2bn


Counting the cost of MiFID II report highlights


Are you ready for MiFID II transaction reporting?


The Barbell Effect of MiFID II Research Unbundling


Trading analysis is critical in best execution

For more published material, visit our MiFID II Resources Library.

Experts

Rob Flatley

Managing Director − Equities, IHS Markit

Kirston Winters

Managing Director − MarkitSERV, IHS Markit

Tom Conigliaro, CFA

Managing Director − Brokerage and Research Services, IHS Markit

John Jannes

Director, Trading Analytics, IHS Markit

Experts at Events

STA Florida
8th-11th Feb, 2018
Florida, USA

Credit Suisse Global Trading Forum
7th-9th March
Florida, Miami Beach

EMEA Trading Conference 2018
15th March
Old Billingsgate, London

 

MiFID II FAQs

What are the key requirements around clients payments for research?

An investment firm will need to set up a research payment account funded by specific research charges billed to the firm’s clients. Research charges to fund these accounts must be based on a research budget determined by the investment firm, and cannot be linked to the clients transaction volumes or values.

What are the research budgeting requirements?

The amount and frequency of the research charge to fund the research payment account must be agreed between investment managers and clients. Research budgets may only be increased with a client’s written agreement, and must be managed solely by the investment firm, with senior management oversight. Investment managers need to put in place certain controls, including a clear audit trail of payments to research providers and how the amounts were determined. Investment managers need to regularly assess the quality of the research, including its ability to contribute to better investment decisions and the extent it benefits client’s portfolios and have a written policy documenting this process.

What challenges could firms face around research budgeting?

The amount investment managers are willing to pay to each broker supplying research will need to be determined in advance. The aggregation of these budget figures will determine the research charges for the firm’s clients. Increasing the research budget will require written agreement from clients. Research commissions will need to be tracked at the fund level. Broker votes can be used for allocating research charges, but do not address budgeting and client approvals.

What if investment managers choose to pay out of their own pocket instead of dealing with the added administrative burden?

Direct payment by investment managers only requires general disclosure and conflict management. Investment managers may account for their direct payment through an increase in their portfolio management or advice fees.

How do CSAs factor in with the new research payment rules?

Asset managers may be able to use CSAs to pay executing brokers for trade execution while allocating part of the commission for a research provider. CSAs may become a mechanism adopted to implement research payment accounts. They help address conflict of interest issues between brokers and portfolio managers. However, CSAs alone do not meet MiFID II requirements as they allow research charges to be linked to transaction volumes.

How do the new research payment rules impact broker dealers?

Broker dealers may potentially benefit from the new guidelines as CSA brokers. However, ESMA states that research pricing should be unbundled and is calling for the European Commission to address conflicts between investment banking and research.

What are the key requirements around investment manager’s execution policies?
Execution policies should be customized depending on asset class and type of service provided. Policies must include factors used to select an execution venue, such as price, costs, speed and likelihood of execution, and the relative importance of each factor. Investment managers must also provide clients with information on how venue selection occurs, specific execution strategies employed, and procedures used to analyze execution quality and how best execution is monitored and verified. The firm’s top execution venues also need to be disclosed. Client requests for information about policies must be answered clearly and within a reasonable amount of time.
How does best execution apply to products that trade OTC?

Where they execute over-the-counter, investment managers must be able to check the fairness of the price proposed to the client. This shall be done by gathering market data used to estimate the price of the product and through comparisons when possible to similar products.

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