Two months after MiFID was implemented, those fishing in European waters had 122 venues on which to trade a European equity. Put into perspective, Europe’s equities ocean is as big as the rest of the world’s combined.

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An industry-wide gap has opened up between new regulatory requirements and current trading infrastructure capabilities in a fragmented market. Today, there are 260 European execution venues and 35 of them trade the 1000 most liquid securities.

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When preparing the Markets in Financial Instruments Directive (MiFID), the EU Commission was keen to underpin the new, more open cross-border trading environment with adequate levels of market supervision by regulators. As a result, MiFID also contained provisions setting minimum securities transaction reporting requirements for all investment firms with a reporting obligation.

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By PJ Di Giammarino, CEO of JWG-IT Group Limited.

There is no room for scepticism in the post-MiFID world: the game has completely changed, and there is a set of new rules by which firms seeking continued success must abide.

In the aftermath the launch of the Markets in Financial Instruments Directive (MiFID), the boundaries and differentiators of a new and better marketplace stand clearly visible and those on top of their game are already working out their winning strategies.

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One has to look in many places to understand the new relationship between the customer and their investment firm post-MiFID. Best execution policies are a good start, but the terms of business and lists of venues buried on web sites must also be researched. JWG-IT has sampled 50 relationships and found that it is true that the vast majority of best execution policies are basic, outlining merely generic price and the nature of orders with no specific references to acceptable execution speeds or transparent cost information. The general approach has been to assert that the right trades will be executed despite a changing and uncertain environment.

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It may have been announced quietly, but it IS official – the EU capital market is now fragmented. As of this week, CESR lists more multilateral trading facilities (MTFs) than there are regulated markets (RMs). After adding the 13 systematic internalisers (a growing number but far lower than we expected), the total number of execution venues has climbed to 207 this month (at the time of writing).

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The first milestone of MiFID implementation came to fruition on November 1 and following much discussion and deliberation, the vast majority of financial institutions have succeeded in reaching the compliance milestone. But in so doing, how many have missed potential profits, positioning and competitive edge that a strategic approach to MiFID compliance offers?

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In Greek mythology, the Sphinx, an amalgamated monster of many races, asked all wayfarers on the road to Thebes, “What creature is it that walks on four legs in the morning, two legs at noon and three legs in the evening?” If they failed to solve the riddle, the Sphinx killed them. When Oedipus answered “man”, the Sphinx committed suicide rather than live with a hole in her execution policy.

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By Richard Newbury, head of product management at Telekurs UK.

How long will we have to wait for the European cross-border corporate actions processing environment to become as harmonised as Europe’s trading environment under MiFID?

It’s November 1957 and the British Prime Minister, Harold Macmillan, has announced that the UK has applied to join the European Economic Community. The London Stock Exchange is to have all of its trading moved to IBM’s new 305 RAMAC computers and paper ledgers and messengers will no longer be used.

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By Anthony Kirby, head of regulation and compliance at Accenture.

This story begins and ends with digging. When Monnet and Schuman conceived the idea of the European Union and the Treaty of Rome was signed in 1957, the aspiration was to ensure the freedom of movement of goods, persons, services and capital, and the Common Market started with goods – iron ore and coal dug from the ground to be precise. Thirty years later, the progress towards the creation of a single market for all four domains was accelerated by the passage of the Single European Act in 1986, which introduced qualified majority voting and the principle of mutual recognition (needed to ensure harmonisation of the laws within each Member State). Subsequent discussions on creating a single market in financial services resulted in the tabling of a framework for action called the Financial Services Action Plan (FSAP) which was published in May 1999. The motivation for doing this was economic and threefold; first, to ensure that capital could be raised more easily by European companies intending to start up or innovate; second, that supply and demand for capital could be matched more effectively; and third, to ensure that consumers EU-wide could access a far greater choice of financial products.

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The European Commission’s MiFID Level 2 guidance, issued in February 2006, listed 23 data fields to be included in any MiFID transaction report to a competent authority. It also listed 12 further fields to be included in other reports, including post-trade transparency reports and reports to clients. Conspicuously, however, it omitted to define the actual content of each field for example, “instrument identification”.

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I have been commissioned by a well known New York journal to write a paper on the differences between MiFID and RegNMS (Regulation National Market System). This is due for publication in October. This article is an abridged version (a podcast of the full paper is available - please contact me for details).

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In the film ‘Running Man’, Governor Schwarzenegger played a cop who was blamed for a massacre which wasn’t his fault. Rather than serve a sentence in prison, he takes part in a government-owned violent game-show where contestants run for their freedom and try to avoid the state hurdles.

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A well known lobbyist once stated that his ideal best execution policy would be one that said “a bit of magic has been done on your behalf”. Sounds really good, but the obvious question remains: what if the muggles want to be sure it worked?

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Second Officer: I don’t think I’ve ever seen such a flat calm.
Captain Smith: Like a mill pond, not a breath of wind.
Second Officer: It will make the bergs harder to see… with no breaking water…
Smith: Hmm. Well, I’m off. Mantain speed and heading, Mr Lightoller.

We are now making headway with fewer than 70 work days until MiFID must be tested and ready for employers, customers and regulators.

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In 1984, it was said that ‘Jocks only think about sports, nerds only think about sex’. Today, nerds would do better to think about MiFID.

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A MiFID programme meeting, with thanks to Lewis Carroll:

“But I don’t want to go among mad people,” Alice remarked. “Oh, you can’t help that,” said the Cat: “We’re all mad here. I’m mad. You’re mad.” “How do you know I’m mad?” said Alice. “You must be,” said the Cat, “or you wouldn’t have come here.”

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Despite the moving target of new regulations and yet-to-be-finalized best execution rules, financial firms aren’t likely to be given a reprieve from the November 2007 MiFID deadline or the penalties that come with failure to comply.

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“Few could conquer with Pizarro or sail with Drake, but the California Gold Rush was the great adventure for the common man,” wrote California historian and editor, Carey McWilliams, in 1949. Just as idealistic journalists have looked backwards with fondness, many vendors and service providers have been looking forwards to the MiFID gold rush. The reality is just beginning to set in; MiFID is no quick claim or fast sales opportunity. It will mean financial institutions and their suppliers embarking on a multi-year change programme to transform and integrate disparate processes across the enterprise.

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Only Bulgaria and the U.K. made the January 31 transposition date, but word on the Continent is that markets are now moving. Commissioner McCreevy has threatened to begin infraction proceedings this month against those countries that have not taken the transposition date seriously. Perhaps more importantly, financial institutions in the major markets are moving. The biggest leading indicator: the U.K. MiFID senior programme manager contractor rate has tipped £1,400, two months ahead of schedule.

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