City staff who spent the Christmas period racing to prepare for a major piece of EU legislation that goes live on Wednesday have been warned that meeting the deadline does not mean the work is over, reports The Telegraph.
Staff at firms including TP ICAP were barred from taking holiday during the festive period so that they could prepare for the sweeping markets reform, known as Mifid II, by the January 3 deadline.
But EY has warned that even though it expects large asset managers to be "substantially compliant" today the work is far from over due to remaining uncertainties, the potential for further guidance and possible inaccuracies.
"Mifid II has of course been a huge body of work for businesses, and it’s not over yet," said EY's Mifid II expert Uner Nabi. "Firms may be keen to refocus resource on other priorities as soon as possible, but work on Mifid II will have to continue with adequate resourcing for around six months into 2018."
Compliance teams across the City have been scrabbling to prepare for the new rules in time for the long-awaited deadline, which kicks-starts the biggest market reform in over a decade and heeds the lessons learnt from the financial crisis with the aim of increasing transparency.
Pegged as the biggest shake-up in the City since Margaret Thatcher’s “Big Bang” programme of deregulation in 1986, the upheaval influences almost every part of the process for those involved in buying and selling shares - from changing how analysts' research is paid for to demanding more detailed information about trades.
Consultants Alpha FMC agreed that implementation day is not the time for the City, which has already spent millions of pounds preparing for Mifid II, to declare mission accomplished.
TP ICAP boss John Phizackerley said people had to work over Christmas because “you can’t phone up the FCA on Jan 4 and say: ‘Sorry, we were eating turkey."
TP ICAP boss John Phizackerley told The Telegraph earlier this year that people had to work over Christmas because “you can’t phone up the FCA on Jan 4 and say: ‘Sorry, we were eating turkey."
"The deadline may have arrived, but that doesn’t mean the work is complete," said Andrew Glessing, who runs Alpha FMC's regulatory team. "Asset managers will have more to do in the first half of 2018 than most imagined. Concerns remain over the challenges presented and how the regulator will assess implementation."
For example, stockbrokers now have to charge fund managers for research rather than "bundle" fees into dealing commissions. This is an ambiguous area and may be interpreted differently by different firms. Nick Burchett, a UK equities manager at Cavendish Asset Management, said that questions still remain around what actually constitutes research.
This could have a knock-on impact on Europe's stockbroking community, said Daniel Carpenter, head of regulation for software firm Meritsoft. "Today may well be the date everyone has been frantically working towards, but when it comes to the thorny issue of research billing and commissions, the real work is yet to begin for brokers," he said. "Fixed income, currency and commodity (FICC) brokers in particular have plenty of food for thought."
Michael McKee, head of financial services regulation at law firm DLA Piper, added that today could be "more of a whimper than a bang" for the industry given the amount of work still to go.
"The reality is that on implementation day many member states will not have implemented it and consequently it will still be some time before these major market changes hit home," he said.