Who's Afraid of MIFID 2?: Fixing Wall Street’s Broken Plumbing
The European Union (EU) has sweeping reforms of financial markets coming into force January 3, 2018. They will affect Wall Street firms in many ways, covering all transactions of EU securities wherever traded worldwide. Whether the firm is on the buy-side: portfolio managers, mutual funds, institutional investors, or on the sell-side: broker-dealers, investment advisors, researchers, consultants, MIFID II will affect business models, research, trading, reporting and order execution.
MIFID II tightens rules on high-frequency trading (HFT), requires oversight and transparency of all trading platforms, including dark pools, registration of all trading algorithms and monitoring of their assumptions and performance, separates research from commission fees, requiring more transparency on derivatives, as well as on order flows, UTC time-coding and execution.
So we hope that Wall Street and all US firms are readying for MIFID II compliance, after this past year’s grace period. All these reforms are designed to secure markets from another 2008-type meltdown. Yet, in the USA the Trump administration is bent on gutting Dodd-Frank and other reforms --- come what may.
This is where the ethical investment market and its movement of retail investors and concerned citizens, whether branded overall as: "ESG, SRI, CSR," green, ethical or "impact" investing, can take wider leadership. Most of their investments and products are already compliant with most MIFID II reforms. They and all their trade associations: SIF, PRI, the Global Compact, We Mean Business, ASBC, GIIN, CERES, and auditors: SASB, IIRC, CIMA Global, as well as all the firms offering fossil-free portfolios and other superior ethical products will have a new competitive advantage!
Anyone can get up to speed on how MIFID II works , thanks to our friends at Bloomberg LLC . They offer guidebooks for both buy and sell side firms in their "Becoming MIFID II Friendly" as free downloads from www.bloomberg.com
We at Ethical Markets Media, as a Certified B. Corporation with our global outreach to our networks of ethical investors, asset managers and entrepreneurs stand ready to help facilitate this opportunity provided by the EU’s MIFID II. We drew attention to the corruption of Wall Street by HFT, insider-trading, naked short-selling, speculation, kickbacks on orders and the "maker-taker" model of some electronic venues in my "Perspectives on Reforming Electronic Markets and Trading" (2015), also at www.unepinquiry.org
We also looked at the digital revolution in finance in my "FINTECH: Good and Bad News for Sustainable Finance". In our Green Transition Scoreboard® 2017 Report explored "Deepening Green Finance". Many pioneer asset managers in our global TV series "Transforming Finance" distributed at www.films.com believe, as we do, that markets cannot exist without trust, truth honesty and transparency. Let’s leverage MIFID II to widen such market reforms in in the USA and worldwide.
Hazel Henderson, CEO of Ethical Markets Media Certified B Corporation, is lead author of the Green Transition Scoreboard® and nine other books on global issues.