FCA chief executive Andrew Bailey has shared some signs of relief over the impact of new European regulations on UK companies as he finds no immediate market disruptions for the main asset classes.
In a speech at the International Capital Market Association today, Bailey said Mifid II, which came into force on 3 January, was well received by most firms despite the regulation being “a massive undertaking”.
Even if it is early days to paint the full picture on the effects of Mifid II, Bailey said: “Wholesale firms made a very significant effort to prepare for the implementation of Mifid II, for which many thanks. I know that this comes with a cost.
“Despite some inevitable roughness around the edges, the preparations paid off with no major operational disruptions to trading – and evidence that the changes have not adversely affected liquidity across equities, bonds and derivatives.”
However, Bailey said firms might need to do more about the implementation of some of the rules, particularly around reporting.
He said: “We expect firms to be working to tackle issues and we also recognise that there remain some important interpretative issues to address.”
Mifid II aims at enhancing transparency and investor protection, but the FCA has noted the complexity and challenge of transaction reporting, which has been widely debated in the past month.
The FCA estimated that under the new regulation there will be up to 15 million more transaction reports a day, compared to the pre-Mifd II period.
Bailey said: “The volume of reports reflects the role of London as a global financial centre. There is a determination on our part to exploit the full possibilities of these data to support our efforts to deter, detect and punish market abuse.”
On the effects on markets, Bailey said there have been no disruptive effects on bonds, although the recent volatility might have skewed any possible spread moves.
He added: “We have seen a pronounced downturn in OTC equity trading, as expected. There have been delays in introducing some of the planned measures, notably the double volume cap which limits dark trading. I have no doubt that across the EU, the data systems will get up to speed and enable this to happen and I am relaxed that it will happen robustly without disrupting markets. The European Securities and Markets Authority has said it will happen in March.”