As financial markets come to terms with the seismic outcome of the UK referendum, what will Brexit mean for the Markets in Financial Instruments Directive (MiFID)?
It seeks to improve the competitiveness of the EU by creating a single market for investment services and activities and to ensure a high degree of harmonized protection for investors.
But if the UK — recognized as one of the world’s leading financial centres — exits the EU will it still need to implement these wide reaching and stringent new regulations? Or will MiFID II be postponed for a second time having already been delayed a year until January 2018?
The most likely outcome — and arguably the safest approach for UK financial institutions — is that nothing will change.
There are several reasons why the market should expect #MiFID implementation to continue as planned and for UK-based financial institutions to remain fully within the remit of the legislation.
First and foremost, even if Article 50 were triggered today the UK will likely still be a member of the EU when the directive applies from January 2018.
So effectively, the UK will still be subject to the new regulations at the point MiFID II comes into being.
Secondly, there is no evidence that the UK Government or regulatory authorities have any intention of changing UK financial regulatory standards following exit from the EU.
Indeed, much of MiFID reflects either international standards that the UK has already signed up to or areas where the UK is known to support the objectives.
Thirdly and perhaps most importantly from a legal perspective, for the UK to retain full access to the European financial markets, it must either negotiate to remain a part of the European Single Market, or operate as a so-called third country subject to the equivalence provisions set out in various EU legislation, including MiFID and MiFIR.
These provisions require third country firms providing regulated services into the EU to be subject to regulations deemed equivalent by the European Commission.
Both outcomes will require full implementation of EU financial law in the UK if UK-based firms wish to continue selling financial products into Europe.
So from our perspective, we will remain focused on delivering a comprehensive response to MiFID in the form of propositions and services that will help our customers to comply with the new regulations and to earn their trust as the strategic partner of choice.