Mifid, repo volume and capital requirements

MIFID’s systematic internaliser mystery

P2P REPO in bid to solve US liquidity crunch

SIMPLER CAPITAL REGIME gets Fed support

COMMENTARY: Miffing the mark

The biggest piece of financial markets reform in years was never going to be easy, but it’s now becoming increasingly clear that 2018 is going to be dominated by uncertainty about the implementation of the second Markets in Financial Instruments Directive – affecting markets not just in the EU but worldwide. Confusion is expected over the rules on systematic internaliser status: with regulators not expected to act until September, banks will have to declare SI status themselves, and the buy-side firms they will be dealing with are growing concerned about the implications for trade reporting.

Commodity investors are equally concerned that almost no regulators in the EU have yet released details of the net position caps Mifid II will impose from the start of next year.

It is also unclear how Mifid’s ‘trading obligation’ – one of the core rules of the directive, forcing certain derivatives to be traded on multilateral platforms – will affect the kind of packaged trades used for hedging, with higher costs looking likely for hedging institutions. And institutions outside the EU are likely to face a year of doubt as well – though a ruling on EU-US swaps trading equivalence is due in November, trading venues in Singapore and Hong Kong may have to wait well into next year for regulatory clarity.

That’s just this week’s crop of stories; there have been many others over the past few months. Perhaps future regulatory reform should avoid the model Mifid II follows of a single omnibus directive covering many issues at once. Mifid II will anyway see a staggered implementation, simply because regulators will run out of time to have all the details ready for January 3, 2018.

STAT OF THE WEEK

The US Consumer Financial Protection Bureau proposed a $192 million settlement against Aequitas Capital Management, which US regulators say was involved in fraud and predatory lending in collusion with for-profit university Corinthian Colleges.

QUOTE OF THE WEEK

“Yes, we have higher capital regulations than other countries [but] US banks have performed much better than other countries’ banks during this time period. I think it’s hard to say that is a fundamental problem… gold plating hasn’t necessarily hurt as much. You would have expected some of those that hadn’t gold plated to have done better” – David Lynch, Federal Reserve Board