Global independent research and advisory firm, Financial Insights, an IDC company, today announced the release of a new report focusing on the recent European regulation, the MiFID (Markets in Financial Instruments Directive), that will create a single European capital market and is scheduled to apply in 25 EU Member States, through April 2007. Financial Insights predicts that under the directive, new technology investments and supply chain reconstructions are inevitable. All market participants will have to carefully assess all the implications and think hard how to reinvent themselves, given the disruptive effects from a business and IT point of view and the related technology investment needed to comply. "There are significant new opportunities, but also major threats offered by MiFID," says Simona Macellari, research and consulting manager for Financial Insights EMEA. "We are likely to see considerable consolidation by both market participants and technology vendors as firms jockey for position ahead of the implementation date."
According to Angela Vacca, senior research analyst for European IT Opportunity at Financial Insights EMEA, "IT players will have to identify their value proposition in a clear way due to the increasing competition generated by MiFID. In addition, they will have to adapt their go-to-market strategy to cover the emerging needs generated by the regulation while providing more value."
Financial Insights expects MiFID to generate an increase in liquidity and competition across the whole of the supply chain, with particular growth in multilateral trading facilities (MTFs) and electronic trading networks. In addition to this, through consolidation, midsize investment banks will begin to achieve real economies of scale and scope and sustain their positions, while mergers and acquisitions between midsize or smaller brokers and fund managers will significantly increase in number from 2007 on.
Other effects of the MiFID forecasted by Financial Insights include:
- Increased demand for outsourcing and ASP services will enable smaller participants to cope with the new regulatory requirements and the complex market structures that will follow.
- New demand will grow for real-time, multi-asset class, low-latency, nonstop trading technologies compliant with the emerging pan-European legislation.
- New challenges for operational and system risk management will emerge from the market-led approach of the regulators.
This Financial Insights study, "MiFID: The Last Thunderbolt from Brussels," by Simona Macellari and Angela Vacca (Financial-Insights #FIN1635, July 2005), gives an overview of the new European Union Markets in Financial Instruments Directive (Directive 2004/39/EC), which will become a reality in 2007. It describes how the directive emerged from the earlier ISD, and how it will impact both business and IT operations. The current timetable of expected implementation is also presented along with potential competitive advantages and constraints. Because of the broad impact the legislation is likely to entail, market participants are urged to start investing now in appropriate solutions.
