On 3rd January the Markets in Financial Instruments Directive (the so called MiFID II) is finally entered into force, binding with its new package of rules all European-based financial businesses involved in the distribution or trading of financial instruments (including the major U.S. banks operating in Europe).
The Directive - as stated by ESMA, in the Q&A released on December 18, 2017 - is aimed to “strengthen investor protection and improve the functioning of financial markets making them more efficient, resilient and transparent”.
For this purpose financial companies will be asked, among others, to collect, store and make available to regulators a remarkable, probably unprecedented, amount of data.
Indeed, as once again stated by ESMA in the report, the Directive (and its Delegated Regulation) are intended “to provide the public with valuable data that will diminish information asymmetries and help investors select the firms they want to work with”.
Financial businesses will - in particular and among others - have to disclose how much they pay for investment research, how much they charge investors to underwrite their debt and how they have distributed those bond sales.
Furthermore, to make possible for the regulator to quickly access all the relevant information about the single financial transaction, firms will have to log millions of electronic messages about clients.
At the same time, the use of the so called “dark pools” (venues that allow to trade in secret and avoiding to discover their moves to computer-driven traders) and OTC trading will be significantly restricted.
It is not hard to imagine what a huge technology challenge the volume of data required by the implementation of Mifid II will represent for financial businesses: will them prove themselves ready to face it?