Deloitte zooms in on investment strategy in a new report on MiFID II

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In its fresh report Navigating MiFID II – Strategic decisions for investment managers, Deloitte highlights the key challenges of MiFID II, the changes the Directive is likely to bring and indicates areas where investment managers can potentially gain competitive advantage

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16/11/2015 |
  • Mifid

The report states that MiFID II will increase the costs of doing business and reduce margins, but not all market players will be equally affected.

The increased costs are unlikely to be passed on to investors due to competition between firms. Larger investment managers will be better placed to absorb these costs and smaller niche firms may be less affected by certain rules. Firms finding themselves in the middle-group need to consider how to best prepare for MiFID II, and possible options are market consolidation, changing product offering and investment strategy,” explains Simon Ramos, Partner and Advisory & Consulting Investment Manager Leader at Deloitte Luxembourg.

The Markets in Financial Instruments Directive (MiFID) II will have significant and wide-ranging implications for the operations, conduct and governance of multiple organizations in Luxembourg and across Europe. The Directive is considered to be the European regulation which will have the greatest impact on investment managers and their strategy over the next two years, and the timeline for implementation ends in January 2017. A little more than a year before its implementation, market players are looking for ways to optimize their business under the new rules and turn MiFID II into an advantage for their business.


Operational challenges

The increased transaction reporting requirements will have considerably technological implications for smaller investment managers. The report suggests that third party reporting solutions will emerge to respond to these needs. MiFID II is likely to lead to substantial changes in investment managers’ product offerings and a shift to more “non-complex” products. Investment managers are expected to opt for multiple distribution channels and increase their focus on direct to client offering and investment in digital services. While highlighting the challenges MiFID II will bring, the report also underlines the possible opportunities for growth.

MiFID II will give rise to a significant amount of new data. Market-leading firms will seek to use the increased data to their competitive advantage and use MiFID II as a catalyst to ensure their data infrastructure is flexible and efficient. Investment managers should be thinking strategically about how they can optimize their business under the new rules,” comments Johnny Yip, Partner and Investment Management Leader at Deloitte Luxembourg.

MiFID II was adopted by the European Union in April last year. The aim of the Directive is to address the shortcomings of the initial MiFID framework dating from 2007 and further reduce the systemic risk that became apparent during the financial crisis. MiFID II is set to transform trading and transparency and this time the greatest effects will be on derivatives and fixed income assets.

Read the full report here

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