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How will Brexit impact MiFID II?

Mike Powell

13 Jul 2016

Revellers wrapped in European Union flags walk at Worthy Farm in Somerset during the Glastonbury Festival, Britain, June 22, 2016. REUTERS/Stoyan Nenov - RTX2HNDJ
REUTERS/Stoyan Nenov

As financial markets come to terms with the seismic outcome of the UK referendum, what will Brexit mean for the Markets in Financial Instruments Directive (MiFID)?

MiFID II is the cornerstone of the European Union‘s (EU) regulation for financial markets.

Listen now to the webinar recording — Thomson Reuters MiFID & Best Execution Webinar (July 2016)

It seeks to improve the competitiveness of the EU by creating a single market for investment services and activities and to ensure a high degree of harmonized protection for investors.

Read more about the effect of MiFID II across the financial spectrum

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But if the UK — recognized as one of the world’s leading financial centres — exits the EU will it still need to implement these wide reaching and stringent new regulations? Or will #MiFID II be postponed for a second time having already been delayed a year until January 2018?

The most likely outcome — and arguably the safest approach for UK financial institutions — is that nothing will change.

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Timing factor

There are several reasons why the market should expect #MiFID implementation to continue as planned and for UK-based financial institutions to remain fully within the remit of the legislation.

First and foremost, even if Article 50 were triggered today the UK will likely still be a member of the EU when the directive applies from January 2018.

So effectively, the UK will still be subject to the new regulations at the point MiFID II comes into being.

Legal perspective

Secondly, there is no evidence that the UK Government or regulatory authorities have any intention of changing UK financial regulatory standards following exit from the EU.

Indeed, much of MiFID reflects either international standards that the UK has already signed up to or areas where the UK is known to support the objectives.

Thirdly and perhaps most importantly from a legal perspective, for the UK to retain full access to the European financial markets, it must either negotiate to remain a part of the European Single Market, or operate as a so-called third country subject to the equivalence provisions set out in various EU legislation, including MiFID and MiFIR.

Listen now to the webinar recording — Thomson Reuters MiFID & Best Execution Webinar (July 2016)

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These provisions require third country firms providing regulated services into the EU to be subject to regulations deemed equivalent by the European Commission.

Strategic partner

Both outcomes will require full implementation of EU financial law in the UK if UK-based firms wish to continue selling financial products into Europe.

So from Thomson Reuters’ perspective, we will remain focused on delivering a comprehensive response to MiFID in the form of propositions and services that will help our customers to comply with the new regulations and to earn their trust as the strategic partner of choice.

Read more about the effect of MiFID II across the financial spectrum

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