The Futures and Options Association supports the overall direction of the proposed changes within the Commission’s review of MiFID, but highlights a number of concerns in its response to the consultation document today.
The Review places additional obligations and requirements upon firms which could be duplicative and unnecessary. FOA suggests the Commission should assess the potential for duplication and ensure that new proposals are cost-effective and justified by cost-benefit analysis.
The Association is also concerned that the workload on a thinly-staffed European Securities Markets Authority (ESMA) will be intense and will impact on both the process and timetable for implementation of ‘MiFID 2’.
Among the specific areas within the Review, FOA suggests that the role of speculators in commodity markets is critically important and excessive speculation should be dealt with through position management rather than position limits. It also calls for commercial purpose physical forward and spot transactions to remain outside the MiFID scope.
The use of product bans, proposed in Section 8 of the Review, will have severe implications for the function of markets and may even exacerbate risk to the financial system. FOA says no view can be given on this power until more detail is made available as to the criteria governing its exercise and the process authorising such a ban.
FOA chief executive Anthony Belchambers said: “The Commission’s Consultation Document is a high level review of MiFID, with most of the detail yet to come. As such, the response from the FOA has been equally high level. And while we support its overall direction, a number of the requirements in the Review are needlessly oppressive, particularly the proposed limits on execution-only business and bilateral execution. Additionally, the swathe of costly disclosure obligations is more likely to confuse than inform customers.”
Click here to download a summary of the FOA’s response.