Business Law & Compliance

MiFID II – The mother of all EU turkeys

7 min read

10 January 2018

At a bloated 1.7m paragraphs long, the EU's new MiFID II regulation is is a breathtakingly inept response to the international financial crash of 2008.

The founder of the owner of 23 regulated exchanges and market places around the world has called MiFID II, which went live on 3 January, “the worst piece of legislation I have ever seen in the history of my career”. Jeffrey Sprecher, the CEO of the Intercontinental Exchange (ICE) is not wrong. It is an absolute stinker.

Markets in Financial Instruments Directive 2 (MiFID II), slow cooked up by Brussels over a mere seven years, is a series of rules which is supposed to create a European-wide legislative framework for regulating the operation of financial markets.

As such, its consequences affect all of our lives as we all employ finance to go about our everyday business. It should then be a thing of clarity, instead it is generating a vast financial fog, which really should come as no surprise the minute you realise that this legislation comprises some 1.7m paragraphs.

If we make the hugely optimistic assumption that the average MiFID II paragraph consists of just ten words then that means it stretches to a total of 17m words. By way of comparison, the King James’ Bible makes do with 783,137 words. So the handbook, or if you will, the instruction manual of the Christian world, which has been doing sterling service for hundreds of years, is, at the very least, 21 times shorter.

This is a level of madness worthy of the Mad Hatter’s Tea Party. Yet billions of pounds, dollars and euros have been spent by people from Sprecher’s organisation onwards in an effort to take it seriously. How Lewis Carroll would have laughed.

No human being or artificial intelligence can possibly digest such a massive turkey. Nor can anyone be expected to come up with a definitive set of compliant actions that will be bullet proof against testing in the law courts. No surprise then that so far just 11 of the EU’s 28 members have transposed the MiFID II rules into their national laws.

Avoiding MiFID II?

It should also come as no surprise, as national regulators were propelled towards the cliff edge of  this on 3 January, that they decided to blow a sizeable hole in this Brussels turkey. With just hours to go before MiFID II went live, first the German regulator (inevitably), then the British and the French, gave permission to the world’s largest future exchanges and clearing houses to take another 30 months to comply.

This fiasco largely leaves the turkey being offered to retail and institutional investors who are supposed to benefit from MiFID II’s voluminous attempt to make research reports independent from broking and other services. The reality is that, yet again, the turkey is inedible. James Bartholomew, in his “Diary of a Private Investor” in the 6 January edition of the Daily Telegraph, summed it up with chilling accuracy when discussing his equity investments.

He said: “I investigated most of these companies with the benefit of research from a wide variety of analysts supplied to me by my stockbroker. But earlier this week new regulations imposed by the EU, called MiFID II, came into force. They require brokers and fund managers to pay for research reports instead of getting them in return for putting business their way. My broker has warned me that because of the new rules it will obtain far fewer reports and will probably not be able to let me see them anymore. To put it bluntly, I think this is a violation of personal freedom. It also reduces still further the contact that people should be able to have with the realities of the commercial world. I hope that changes will be made when we exit the EU.”


Brexit and the new Markets in Financial Instruments Directive

David White talks about the implementation of new MiFid ii (Markets in Financial Instruments Directive), and what UK businesses should expect for these regulations now.


In case you think that is the grumblings of an insignificant private Brexiteer then hear this from Steve Grob, director of group strategy at Fidessa, which supplies trading, investment and financial software to the world’s financial community.

He said:“Two things strike me about MiFID II. First is the enormity of the industry effort involved in getting ready and, second, the almost complete insignificance of it all. Does the man in the street feel that today he has been somehow liberated from the clutches of capital markets? Frankly I doubt it.”

In a way we should be grateful to MiFID II because it provides the perfect illustration of how absurd the EU has become and why it is essential for us to leave. It is a breathtakingly inept response to the international financial crash of 2008.

Some seven years in the making and all the while assembled by a centralised, largely financially inexperienced army of bureaucrats, accountable to a lightweight parliament in Brussels/Strasbourg made up of second rate national politicians collecting heavyweight salaries and expenses.

Then, having been nodded through by the EU parliament, 1.7m paragraphs of rules are foisted onto overburdened national regulators and their regulated, whipped on by an ever more power grabbing gorgon calling itself the European Securities and Markets Authority.

Truly the mother of all EU turkeys. Truly a Brexit Thanksgiving.

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