MiFID pain will end in gain

European Commissioner for Internal Market and Services, Charlie McCreevy, has encouraged the EU financial services sector to see beyond the pain involved in implementing the Markets in Financial Instruments Directive (MiFID) and focus on the long term benefits the legislation will deliver. In a speech to the Irish Association of Investment Managers in Dublin, Commissioner McCreevy also defended the role of regulators saying that the intent of EU capital markets regulation in recent years has been to "facilitate and not to restrict".

MiFID has been the subject of considerable criticism in recent months and has often been at the centre of the over-regulation debate. McCreevy however has backed the benefits of MiFID saying that delivering the freedoms of a more open market would inevitably come at a cost.

"I have heard criticism of some of the proposed implementing measures in the Markets in Financial Instruments Directive in recent months. Ironically, much of it has come from markets which stand to benefit most from this legislation. Everyone must recognise that market opening measures which involve levelling the playing fields between operators across the Member States have up-front implementation costs. If barriers to open markets are to be broken down, if single market freedoms and passports and all the benefits that they bring are to be made available, the implementing measures negotiated at Level 2 of the Lamfalussy process that are necessary to put those freedoms into practice will inevitably involve burdens."

McCreevy commented that despite his support for Lamfalussy, the process did make it "more challenging" to predict costs and benefits of regulation ahead of time due to the way Lamfalussy is structured. Level 2 of the process, which involves the implementation details for national financial regulators, only comes after the principles of a regulation have been framed in Level 1.

In support of Lamfalussy and its role in MiFID, McCreevy said, "There remain a number of controversial outstanding issues on which agreement must still be reached – I hope that they can be resolved in a way that ensures Europe reaps most of the benefits that the MIFID is intended to deliver for the equity markets– including more competition, increased transparency, better execution, and deeper pools of liquidity."

The full text of Commissioner McCreevy's speech, "Financial services in Europe today", is available on the European Commission website.