(i) MiFID II
In December 2010, the Commission published a consultation paper relating to proposed amendments to MiFID. Following that consultation process, the Commission published draft legislative proposals in the form of a draft Directive and a draft Regulation, referred to together as the "draft MiFID II Legislation" in October 2011. The draft MiFID II Legislation includes potentially comprehensive reforms to the existing regulatory regime. The proposals introduce a range of measures which seek to address deficiencies in the MiFID regime exposed by the financial crisis. It focuses in particular on addressing problems that have arisen from the expansion in OTC trading in comparison with trading on exchanges and the related issue of transparency of such trading. MiFID II carries fundamental implications for the nature and shape of financial markets by shifting trading from the more opaque OTC market to more transparent organised markets.
In addition custody services (safekeeping and administration of financial instruments for the account of clients), which were previously classified as ancillary services will now become a core investment service, which will bring standalone custodians in Ireland within scope of the MiFID Regulations (as opposed to falling to be regulated under the Investment Intermediaries Act 1995 as is currently the case).
The proposals contained in the draft MiFID II Legislation are comprehensive and represent significant changes to the regulatory regime currently in place in Ireland. The draft MiFID II Legislation is divided into two parts;
(i) a revised Directive which will be an amendment and restatement of MiFID, (the "MiFID II Directive"); and
(ii) a new Regulation which will set out requirements relating to trade transparency and the mandatory trading of derivatives on organised venues, (the "MiFID II Regulation"). EU Regulations take effect as soon as they are published by the Commission and are binding on all EU Member States as soon as they become effective. EU Regulations do not require any implementing measures. It is hoped that the MiFID II Regulation will minimise any scope for divergences in the interpretation of transparency and transaction reporting provisions.
ESMA has been asked to draft accompanying technical standards, (the "Technical Standards") which as yet have not been published. The full extent of the proposed changes will not be possible to assess until such time as the Technical Standards are published. Furthermore it is likely that additional changes will be made to the draft MiFID II Legislation as it is negotiated between the Commission, European Parliament and the European Council.
The time line for implementation of MiFID II is still not clear. The Commissions draft MiFID II Legislation is still at the trilogue stage; this is the process by which the Commission, the European Parliament and the Council of the European Union discuss, amend and adopt the final text of legislation. The Presidency of the Council of the European Union published a compromise proposal on the proposed MiFID II Directive and a compromise proposal on the proposed MiFID II Regulation on 3 December 2012.
Once the draft MiFID II Legislation has been agreed by the Commission, the European Parliament and the Council of the European Union will be published in the Official Journal. Some of the proposals will apply immediately after publication in the Official Journal and others will not be effective until they have been transposed into the national law of the Member States.
More detailed implementing measures to be prepared by the Commission (i.e. Level 2 measures) which will serve to supplement the Level 1 draft MiFID II Legislation are expected to be finalised in early 2014. It is expected that the deadline for enacting legislation in Member States implementing the draft MiFID II Directive will be subsequent to this. In addition the draft implementing Technical Standards (i.e. Level 3 measures) which are to be submitted to the Commission by ESMA are expected to be finalised in 2016.
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