Robert Ophele, chairman of France’s AMF markets watchdog, said Brexit will force the EU to undertake a complete review of the so-called MiFID II rules.
“I don’t think there is a need for a major overhaul of MiFID, but clearly there are some quick fixes, some elements that should be adapted,” Ophele told a conference held by AFME, a banking industry body.
The MiFID rules, which run to hundreds of pages, were only introduced in January, a year late, because of the complexity and the cost for trading firms, banks and even regulators to implement them.
France is actively courting banks based in Britain that are opening EU hubs to avoid Brexit disruption, hoping they will base their trading operations in Paris.
Ophele said legislative fixes were needed to stop market participants circumventing the rules and to improve the quality of transaction data.
“MiFID II may be a complex piece of law, but that does not mean we should shy away from re-opening it and fixing deficiencies where evidence may show that we have gone too far or have generated unintended consequences,” Ophele told an industry event in London.
MiFID II has introduced caps on trading shares in the “dark” or away from transparent platforms like stock exchanges, but Brexit will mean that much of that trading will no longer be in the bloc.
“In the light of this, it makes sense to question whether MiFID II’s quantitative calibrations will be relevant tomorrow when the UK is no longer in the EU,” Ophele said.
Waivers from MiFID rules affecting commodities trading will also need to be revisited given that nearly all metals, oil and coal derivatives are traded in London, Ophele said.
MiFID allows trading firms based outside the EU to serve customers in the bloc if their home rules are aligned or “equivalent” to the bloc’s own regulation.
Ophele said that foreign firms should be made to comply with more of MiFID’s reporting and trading obligations for derivatives and shares in order to qualify, dashing UK hopes of an easing of the equivalence regime.
Brussels will only decide if a foreign firm is equivalent if it has cooperation agreements with its regulator. Ophele said firms should assume there will be such an agreement between supervisors in the EU and Britain’s Financial Conduct Authority.
Reporting by Huw Jones; editing by Larry King