MIFID II: Who’s equivalent now?

Today has been a big day for many City firms as MiFID II, a controversial and long awaited directive comes into effect.  UK firms have spent a small fortune to ensure that they comply with the rules.  This important piece of financial services legislation aims to make the market in financial products more transparent and to improve investor protection.  The EU’s so-called single market is meant to be a level playing field.

Yet the EU’s own website listing of compliance on MiFID II tells a sorry tale.  With the majority of EU members having apparently failed to implement the new regime either in part, or in its entirety.  This comes despite a delay in implementation granted by the EU Commission.

For decades EU member states breathtaking non-compliance with the EU’s own rules has stoked the fires of UK euroscepticism.  One of the prime reasons that the UK’s testy relationship has ended in Brexit is the British public’s perception that we play by the rules that others simply ignore.

In the coming months we can expect some very tough negotiation on financial services from the UK as it makes up 38% of UK exports to the EU.  One of the issues that may arise is whether the UK regime can be considered “equivalent” to the EU to be allowed to trade freely in financial services.  It will be tough for the EU to argue that the UK is not equivalent when most of the EU’s remaining 27 are non-compliant with the block’s own rules.  Don’t expect the EU not to try however.