European transparency rules delayed after pushback from industry

New markets regulation at least a year off for the EU

Bloomberg News

The European Union, under pressure from the financial-services industry, may delay by a year its overhaul of market rules affecting everything from price-disclosure by bond traders to regulation of commodity derivatives trading.

The European Securities and Markets Authority, an EU regulator, warned that “it won’t be possible to implement certain aspects” of the legislation by January 2017, when the rules are scheduled to take effect, said Vanessa Mock, a spokeswoman for the European Commission, on Tuesday. “Our preliminary view is that we share their concerns and that a delay might be necessary.”

The EU’s bid to revamp its market legislation, known as MiFid, is a centerpiece of the 28-nation bloc’s work to shore up regulation following the financial crisis of 2008. The new rules would affect firms ranging from Deutsche Bank AG to Goldman Sachs Group Inc. Industry groups pushed for a delay, arguing that companies needed more time to adapt to the sweeping changes, many of which entail extensive technical refitting.

A delay “would be a welcome recognition of the fact that it will not be practicable for much of the technology and reporting to be put in place by Jan. 3, 2017,” said Michael McKee, a partner at DLA Piper, the global law firm. That’s especially the case as many of the details underlying the rules still need to be worked out, he said.

Many of the proposed standards have been met with opposition from the industry. Deutsche Bank has warned of “potentially damaging impacts on capital markets” from draft transparency rules for the bond market that go beyond U.S. standards. ESMA’s proposals for changes to the market for financial research also riled the industry, and even brought a rebuke from the finance ministries of the EU’s three biggest economies -- Germany, the U.K. and France.

Mock said the Brussels-based commission will discuss the possibility of a delay with the European Parliament and EU member states “before deciding on a final course of action.”

German Finance Minister Wolfgang Schaeuble said in Brussels today that a postponement wouldn’t come as a shock.

“I’m almost used to such delays in Europe, so this doesn’t surprise me all that much,” he told reporters. “I keep pushing - - and for my colleagues that’s almost an impertinence, sometimes because it’s not very original -- that we implement what we have agreed. If it takes a bit longer it takes a bit longer, as long as it comes.”

Steven Maijoor, the chair of ESMA, has attributed the delay to infrastructure challenges. He said the time required for banks and other financial institutions to build the appropriate systems is too tight. And ESMA’s proposed regulatory technical standards, or RTS, needed to make the rules work in practice still aren’t set in stone.

“It will take some time, and well into 2016, before the text of the RTS will be stable and final,” he said in a speech at the European Parliament. “The building of some complex IT systems can only really take off when the final details are firmly set in the RTS and some of the most complex IT systems would need at least a year to be built.”

Peter Bevan, global head of financial regulation at Linklaters, said a delay makes sense.

“With so many areas of MiFID having the potential to lead to significant changes for firms, but with some details still uncertain in important respects, further time for preparation will be welcome,” he said.

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