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About MIFID Connect

MIFID Connect is a joint project designed to support member firms and simplify the UK implementation of the Markets in Financial Instruments Directive (MiFID). Statutory implementation in the UK will be carried through by the HM Treasury and by the FSA making rules in its handbook. The directive will have a major impact on current market and trading practice as well as upon the way in which the financial service sector is currently regulated. It will also require firms to introduce a whole series of changes to their systems, documentation and order-handling procedures.

The Association of British Insurers (ABI), The Association of Private Client Investment Managers and Stockbrokers (APCIMS), Association of Foreign Banks (AFB), The Bond Market Association, the British Bankers’ Association (BBA), Building Societies Association (BSA), the Futures and Options Association (FOA), The International Capital Market Association (ICMA), Investment Management Association (IMA), The International Swaps and Derivatives Association (ISDA) and the London Investment Banking Association (LIBA) have established a joint programme for reducing the legal risk and simplifying the implementation of the Markets in Financial Instruments Directive (MiFID). Statutory implementation in the UK will be carried through by HM Treasury and the FSA. The directive will have a major impact on current market and trading practice as well as upon the way in which the financial service sector is currently regulated. It will also require firms to introduce a whole series of changes to their systems, documentation and order-handling procedures. The Associations believe it is essential that firms are able to implement these requirements in a way that is practical, cost efficient, market sensitive and does not import high levels of legal uncertainty and regulatory risk into customer relations and market dealings. In order to address these issues on an industry-wide basis, working with the international law firm, Clifford Chance, have embarked on a five-stage programme of work for establishing an industry approach towards implementing MiFID which includes:

  1. Developing a set of industry guidelines to assist firms in areas of MiFID implementation which carry a high degree of legal risk and/or legal uncertainty.
  2. Producing specimen industry documentation necessary to comply with the new MiFID requirements.
  3. Providing, through 2006, a series of implementation courses and individual specialist workshops on the practical problems and issues surrounding implementation of MiFID.
  4. Publishing a two-part “Survival Guide”, the first part of which (to be issued in the second half of 2006) will comprise a timetable and strategy for firms to manage progressively a programme of implementation. The second part (to be issued in 2007) will comprise a “tick box” checklist covering all the changes that firms will be expected to introduce by the final agreed date of implementation.
  5. Issuing, through 2006, periodic releases and updates covering timelines and regulatory progress towards finalising the new requirements.

With regard to the proposed industry guidance, this will cover the high-risk areas of MIFID implementation where firms face considerable ambiguity or legal/regulatory uncertainty and will include specimen customer documentation for benchmarking purposes. The Group is working currently on a set of guidelines which will address "best execution" and has commenced work on the next target areas of "appropriateness", "suitability" and "conflicts of interest management". Additional topics of particular difficulty would be the subject of further guidance going forward. The Group recognises that if firms are to be expected to rely on industry guidance, it will be important to engage the FSA in their development.

For confirmation, any draft guidance which is agreed at an early stage in the process of determining the basis of FSA implementation and/or Level 3 requirements will be the subject of continuous updating to ensure that it is fully compliant prior to finalisation.

In terms of MiFID implementation courses, the Group will look to hold a range of joint implementation courses on guidance and specimen documentation produced by it and on any other aspects of MiFID implementation deemed to be appropriate for joint presentation. These courses will be supplemented by the individual courses, seminars and workshops of the participating associations for their own memberships. So far as the courses are concerned, it is likely that the first of these will be held in Autumn of 2006 to link with publication of Part 1 of the MIFID Survival Guide. Further courses will become necessary as the basis of that implementation and the anticipated Level 3 requirements become clearer and, in due course, finalised. It is important that these courses are held sufficiently in advance so as to provide firms with a further 4-6 months in which to introduce any last minute changes prior to the final MiFID implementation date.

With regard to the proposed Survival Guide, the Group has decided to issue the guide in two parts, namely:

  • Part 1, which will be issued in 2006 (to coincide with the first suggested implementation course indicated above) and which will comprise a strategy and plan for managing implementation; and

 

  • Part 2, which will be issued in 2007 and which will comprise a "tick box" checklist i.e. a comprehensive matrix summarising all the changes that firms will be expected to introduce by the date of implementation. (NB Its issuance at least 4 months before the final agreed date for implementation should leave a sufficient period of time to enable firms to "catch up" with changes not yet introduced).

In order to ensure that this programme of assistance is as practical and market sensitive as possible and meets firms' expectations in terms of structure, content and timing, the Group has established an Advisory Committee to work in close co-operation with the participating associations. It will comprise senior practitioners drawn from financial institutions providing international, EU and domestic wholesale and retail investment services across the financial and commodity markets.

Secretariat to the Group:
British Bankers' Association
Pinners Hall, 105-108 Old Broad Street
London EC2N 1EX
United kingdom

Sally Springer: telephone: 0207 216 8841

Email: .(JavaScript must be enabled to view this email address)

 
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