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Bailey warns of no forbearance on Mifid II failings

Bailey warns of no forbearance on Mifid II failings

There will be no forbearance for firms who fail to implement recently implemented European rules, according to the chief executive of the Financial Conduct Authority (FCA).

Andrew Bailey was speaking at the International Capital Markets Association (ICMA) conference in London this morning (1 March).

He said the implementation of Mifid II, which came into effect in January, was not complete but he warned that the regulator expects those issues to be tackled.

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Mr Bailey said: "There is inevitably more to do on implementation for both firms and regulators, particularly on reporting. We expect firms to be working to tackle issues and we also recognise that there remain some important interpretative issues to address.

"Prior to implementation we said that our approach to enforcement of Mifid II would be consistent with our general effective and proportionate approach to the use of our enforcement powers.

"To be clear, it was not our intention to offer forbearance; we expect firms to comply with their obligations. But we thought it important to confirm that we would not use our enforcement powers in a disproportionate manner."

Mr Bailey said the Mifid rules had passed the test posed by volatile market conditions on the past month.

He said: "We were very clear that the highest priority was that the introduction of Mifid II, which was a massive undertaking, did not lead to market disruption.

"Sometimes I get challenged on this, on the ‘rules are rules’ basis – it doesn’t matter what happens to markets as long as the rules are obeyed. No. We have had a lot of experience in London of balancing our objectives whilst ensuring the continuity of markets."

Mr Bailey said a major challenge for investment houses has proved to be around transaction reporting.

He said: "These involved a step change in both the volume and quality of data we receive regarding transactions taking place in the market.

"The FCA [...] undertook extensive technological work to be ready to receive, interrogate and ultimately learn from this dataset. We estimate that under Mifid, we will capture some 30-35 million transaction reports a day, up from 20 million before its introduction.

"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."

As FTAdviser has previously reported, transaction reporting requires firms to inform the regulator of all trades it makes as soon as possible, and no later than the end of the following business day.

The range of assets covered by the reporting rules has also expanded, and the number of reportable fields has also increased, to 65 from the previous level of 23.

david.thorpe@ft.com