Markets in Financial Instruments Directive and Regulation (MiFID / MiFIR)
Market Abuse Directive and Regulation (MAD / MAR)
Senior Manager & Certification Regime (SM&CR)
Since the crash of 2007-2008 the financial markets have been impacted by a host of remedial actions as the Global Regulatory bodies work to prevent any chance of a reoccurrence. Subsequent regulatory focus on Benchmark rates, whether LIBOR or FX fixings, is adding to the impact on financial markets. The funding cost of managing regulatory risk within the wholesale markets has never been higher.
In September 2009 in Pittsburg the G20 finance ministers agreed to establish a set of regulations to protect and control the world’s financial markets, with an end-2012 deadline for implementation. The key agreements that came out of that meeting have driven a vast array of regulatory change from clearing and reporting outcomes through EMIR, DFA and local legislation to trading definitions through MIFIR and DFA. These initiatives have been impacting the markets ever since.
The core G20 aim was to reduce counterparty risk, operational risk and systemic risk within the financial markets, and in particular in OTC derivatives trading.
- The G20 reforms look to have the following impact:
- Change to OTC Derivatives trading workflow with Clearing where possible
- Increase in transparency for both Regulators and the public
- Use of trading venues ‘where appropriate’
- Greater supervision of banks
Whilst the end-2012 deadline was met to varying degrees across the G20 nations, the pace of regulatory change continues to develop to this day. Subsequent developments have served to further complicate the regulatory landscape. The LIBOR Fixing scandal has caused waves of investigation in related areas and the FX Fixing scandals during the summer of 2013 are still reverberating around the FX markets, with hefty fines being handed out from late 2014 and with more to come. The focus on Business Conduct has never been stronger in the OTC markets and significant change is required in how the FX markets approach the management of front office behaviour. In the UK the Senior Manager and Certification Regime has recently been rolled out to banks (March 2016) with a further implementation expected in 2018 to include all wholesale markets participants.
Investor Protection under MiFID and Client Communication monitoring and controls under MAR are aligned and will profoundly change the way in which firms are able to talk with their clients.