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MIFID MATTERS ASSESSING THE WIDER AGENDA
MiFID - what
is it, and what
does it mean?
February 2012
kpmg.com
2 | MiFID - what is it, and what does it mean?
In October 2011, the European
Commission published its much
anticipated proposal for the Markets in
Financial Instruments Directive 2 (MiFID
2). The legislation is the hub of a series
of new regulations that will come into
force over the next few years and will
dramatically reshape the way firms
operating in the financial services sector
conduct their business.
Responding to the regulatory changes that MiFID will bring
requires firms to fundamentally review their business operations
and processes, while simultaneously posing questions about
which markets to continue operating in, and how to position
themselves. Early analysis will be essential to ensure continued
success and profitability in the years to come and therefore
presents an opportunity for firms that take action now to ensure
competitive advantage.
Whilst the intent of MiFID is clear, the text is likely to undergo a
number of amendments and changes before it is adopted.
Parliamentary process will be long, controversial and inevitably
lead to lots of changes to the Commission’s proposal. As
such, the full details are yet to emerge – we will continue to
monitor developments in the negotiation process and share our
perspective on the potential impacts for firms.
© 2012 KPMG International Cooperative (“KPMG International”), a Swiss entity.
Member firms of the KPMG network of independent firms are affiliated with KPMG
International. KPMG International provides no client services. All rights reserved.
MiFID - what is it, and what does it mean? | 3
Background
MiFID 2 comes at a time of
fundamental change sweeping
the financial services industry.
The failure of Lehman Brothers
in 2008, and the financial
crisis that ensued, highlighted
shortcomings in financial markets
that needed to be addressed.
The aim of MiFID 2 is clear – to reduce
systemic risk, strengthen financial
stability by ensuring maximum
transparency in markets and ensure
robust levels of investor protection. In
order to achieve this, the Commission
has focused on “opaque” over-the­
counter (OTC) markets, and extended
pre- and post-trade transparency
requirements currently applicable
to equity markets to non-equity and
equity-like products. The impact on these
markets will be substantial and some
industry participants fear higher costs,
greater complexity and reduced flexibility
in managing risk. Investor protections
are strengthened through more robust
due diligence and disclosures, as well
as changes to third country access to
EU markets.
MiFID is already a cornerstone of
Europe’s financial regulatory regime,
and the proposed changes must be
considered in tandem with other
regulatory developments that are
proposed or ongoing. Linkages
between MiFID, European Market
Infrastructure Regulation (EMIR - central
clearing of OTC derivatives), Capital
Requirements Directive 4 (CRD 4)
(Europe’s interpretation of Basel 3),
Dodd-Frank, the revised Market Abuse
Directive and Regulation (MAD/MAR)
and Regulation on Energy Market
Integrity and Transparency (REMIT) need
to be identified, their impact to business
models determined, and a way forward
mapped. The costs of not doing so are
clear – it was recently estimated that if
US banks retain their current business
models, their return on equity will drop
to 7 per cent, against a cost of equity of
9 per cent1, as a result of Basel and other
regulatory reform. These numbers are
clearly not sustainable for business.
Firms cannot consider each regulation in
isolation. There are a number of common
themes that run across all of them – by
taking a holistic approach to the changes,
firms should ensure that they save time
and money and achieve better outcomes
by aligning objectives and avoiding
multiple overlapping or conflicting
change initiatives.
Why US Banks need a new business model McKinsey and Company, January 2012
1
© 2012 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of
independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
4 | MiFID - what is it, and what does it mean?
MiFID
Theme
Seismic shifts in
wholesale markets
Standardisation and exchange trading of OTC
derivatives
The OTC derivative market will feel particular
heat from the Commission’s proposals under
MiFID and EMIR. Eligible OTC derivative
contracts will need to be traded through an
electronic trading venue, cleared through a
CCP, and be subject to transaction reporting
requirements. This will bring about greater
standardisation and higher aggregate
collaterisation and risk management
requirements. The results: higher costs for
participants, tighter margins and reduced
flexibility when hedging.
The overhaul of OTC derivative trading is done
under the context of wider global reforms
mandated by the G20. In the US, Dodd-Frank
requires that eligible Swaps be traded through
either a Swap Execution Facility (SEF), or
another eligible venue, and be centrally cleared.
The reporting requirements, together with
the clearing requirements in Dodd-Frank are
mirrored in EMIR. Taken together with the
proposed changes brought about by the Volcker
rule in the US to ban proprietary trading, and
capital requirement changes to the counter party
risk regime in CRD 4, it is very likely that the
OTC derivative space will undergo substantial
changes over the next four years. The changes
will impact across all industries, and businesses
that use such financial instruments to hedge
underlying business operations should carefully
consider how the changes will affect their ability
to manage risk.
Market
Structure
Topic
MiFID I
OTFs
- Three trading platforms: Multilateral
Trading Facilities (MTFs), Regulated
Markets (RMs) and Systematic
Internalisers (SIs). Threshold test
in order to register as a Systematic
Internaliser
Automated
Trading
No specific requirements
OTC Derivatives
No specific requirements
Commodity
derivatives
No specific requirements
Central Clearing
- Investment firms have the right
of access to CCPs
- MTFs and RMs may enter into
appropriate arrangements with
CCPs and Settlement Systems in
other territories
Data
Consolidation
No specific requirements
Investment
Advice
NA
Inducements
NA
Execution Only
- Execution only services can be
offered for non-complex products
traded on a Regulated Market or
where they are UCITS compliant
Best Execution
- Firms required to achieve best
execution for their clients
Appropriate­
ness
- Firms assess whether financial
instruments are appropriate for
clients based on information
received from them on their financial
situation and investment objectives
Pre- and
post-trade
transparency
- Pre-trade requirements apply
to shares traded on an SI, RM
or MTF
Transaction
reporting
- Relevant details of executions in
financial instruments to be reported
to the competent authority
Investor
Protection
Transparency
Position reporting No specific requirements
Governance
Third Country
Organisation
Requirements
- General requirements for Investment
Firm and Market Operators, ensuring
that
adequate policies and controls
are in place to ensure compliance
Authorisation/
Registration
- Exemptions currently exist for
non market-making proprietary
traders who are not Sis, and also
for those trading on own account
in commodities or commodity
derivatives
Managing bodies
No specific requirements
Equivalence
No specific requirements
Establishing a
branch
No specific requirements
© 2012 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
Summary of key changes and impacts of MiFID 2
MiFID 2
Impacts
- New category of trading venue designed to capture organised trading
outside of RMs, MTFs and Sis
- Impacts internal crossing systems operated by sell side brokers
- Pre-trade requirements applied to OTC volumes
- Ban on proprietary capital may impact the way in which sell side brokers
achieve best execution
- Continuous liquidity during the trading period
- Annual description of trading strategies to competent authorities
- New registration system and control requirements
- Impacts execution strategies for sell side brokers
- Significant impact to High Frequency Trading (HFT) risk management
- Eligible OTC derivative contracts to be traded ‘on-exchange’
- Clearing obligation in EMIR
- Added costs arising from execution on trading platforms and
central clearing
- Potential reduction in flexibility when hedging positions
- Position reporting for all commodity positions
- Position limits to be enforced by trading venues
- Added cost for trading venues and participants to enact
- Non-discriminatory access to index and benchmark data
- Non-discriminatory access to CCPs
- Threat to those Exchanges operating vertical operating models
- Competition in clearing and derivatives should reduce costs, but potential
for increased complexity
- Additional risk management challenges if dealing with multiple CCPs
- New regime for data consolidation and reporting, including Consolidated
Tape, APAs and ARMs
- Should improve data quality, consistency and granularity - but, greater
complexity and risk of double reporting
- Advisers have to state whether their advice is independent or not.
- Where advice is independent, firms will need to consider a wide range of
products and offerings available, at a potential cost to its own products/
offerings
- Ban on independent advisers receiving/giving third party fees,
commissions or other monetary benefits.
- Firms will need to carefully evaluate their remuneration and commission
policies. Some face significant changes to business models
- Meaning of ‘complex’ has been redefined to include all products with
embedded derivatives, and some Structured UCITS
- This may reduce the liquidity of some financial instruments
- Firms will need to update their appropriateness tests
- Firms to publish top five trading venues for executing orders
- More granular reporting requirements to clients
- Trading venues to publish data relating to the quality of executions
- Greater costs for trading venues and investment firms in achieving best
execution, and reporting against it
- Need to account for the type and complexity of financial instruments
involved, and, in the case of advice, report how that advice meets the
personal characteristics of the client
- Impacts to policies and procedures
- Restrictions in the positions that participants may take could inhibit firms
executing, inter alia, client orders
- Pre- and post-trade requirements extended to non-equity instruments, and - Extending pre-trade requirements to volumes that are currently OTC, and
applies to OTFs
to non-equity, will require firms to adjust their risk management systems,
as quotes extended to a client could be filled by others
- Details of persons responsible for the execution, including executing
algorithms, to be submitted
- Details of end clients on whose behalf orders are executed
- Reports can be made by the Investment Firm, the Trading Platform, or an
ARM
- Complexity in determining who reports the transactions - may require
individual agreements if double reporting is to be avoided
- Added costs of updating systems to comply with added data fields
- See commodity derivatives above
- Overly prescriptive requirements that may run counter to Comply or
Explain
- More specific requirements for Investment Firms, RMs, SIs, Data
Providers and Algorithmic Trading
- Greater systems and controls and record keeping requirements will add
cost and complexity to Firms
- Requirements for all members of RMs and MTFs to be authorised
- Tightening of the exemptions regarding commodity traders
- A larger universe of market participants will be captured by MiFID, and will
therefore need to ensure that they are authorised and compliant
- New requirements for Managing Bodies of Firms and Market Operators,
including quantitative requirements for the number of positions that a
Board member may hold
- The Commission will rule whether the regulatory regime of a third country
is equivalent to the EU’s -This will be required before
- May impose high barriers of entry into the EU for third country firms
- Underestimating the scale of achieving equivalence arrangements ­
uncertainty remains on practical implementation
- Third country firms who wish to provide investment services to Retail Clients
will be required to establish an authorised branch in the Member State
© 2012 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
6 | MiFID - what is it, and what does it mean?
© 2012 KPMG International Cooperative (“KPMG International”), a Swiss entity.
Member firms of the KPMG network of independent firms are affiliated with
KPMG International. KPMG International provides no client services.
All rights reserved.
MiFID - what is it, and what does it mean? | 7
Organised Trading Facilities (OTFs)
A new classification of trading venue is
introduced - the OTF - which is designed
to act as a regulatory “catch all” for
all organised trading that occurs away
from Regulated Markets (RMs) and
Multilateral Trading Facilities (MTFs) and
that is not genuinely OTC. Currently,
internal broker systems that cross client
order flows - often with proprietary
capital - are reported as OTC, and
therefore avoid pre-trade transparency
requirements. Investment firms
operating broker crossing networks will
either need to set up an OTF, or register
their operations as a Systematic
Internaliser (SI).
The new venue will have a significant
impact on the way in which firms
conduct their business; they will not be
able to cross their proprietary capital
with client order flow on the same
platform, and all flows within an OTF
will be subject to pre- and post-trade
transparency (as indeed will those on
an SI). Aside from the well-documented
impact that this will have on OTC
derivative and bond markets, it raises
interesting questions as to how brokers
will go about achieving best execution
- as brokers currently may reduce
execution costs by netting off order
flows internally.
This initiative is proving to be
particularly contentious, and we
will continue to closely monitor
developments in this area, and share
our views on the potential impacts
to firms.
Algorithmic Trading
Automated trading comes under
increased scrutiny. Concerns over
the impact to markets from “rogue”
algorithms and the potential for a
European flash crash have driven
algorithmic trading activities to the
forefront of the regulator’s attention.
Automated traders will be required to
continuously post executable quotes
during the trading day, feedback to
regulators on at least an annual basis
about how their strategies work, and
those who are not already will need to
become authorised - at least where they
are members of a Regulated Market
or a Multilateral Trading Facility (MTF).
Together with these requirements,
algorithmic traders and trading venues
alike will have tightened organisational
requirements to ensure that excessive
orders cannot seize up markets or
increase volatility.
The implications of these requirements
are wide-ranging. By making specific
requirements around posting liquidity
and providing details of trading
strategies, the Commission has
not distinguished between varied
proprietary trading strategies executed
by HFTs, and execution algorithms
operated by sell side brokers. HFT firms
will need to consider authorisation to
undertake their activities where they
are not already, and fundamentally
rethink their risk management policies
to account for the new liquidity
requirements. Sell side brokers may
need to reconsider how they work
large orders through order books
now subject to pre and post trade
transparency requirements, unless
they meet the (much narrower) criteria
for an exemption.
Commodity derivatives under
the spotlight
Political concern over the effects of
speculation in commodity markets
has led to a raft of new regulatory
initiatives for commodity and energy
products. Previous MiFID exemptions
which benefitted non-financial market
participants are significantly scaled
back. Participants who are currently
exempted from MiFID by virtue
of Article 2 (1) (k) (where the main
business of the entity consists of
trading on own account in commodities
and/or commodity derivatives) will
now need to prove that their trading
activities are ancillary operations to
their main business and that they are
dealing on their own account. There
will be two tests for determining what
is ancillary: 1) whether the activity
demonstrably reduces the risks
attached to commercial activity or
treasury financing activity; and 2) the
capital employed for carrying out the
activity. Those who pass these tests,
but still trade wholesale electricity and
gas products, will still need to comply
with REMIT. Those who do not will need
to become MiFID compliant.
© 2012 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of
independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
8 | MiFID - what is it, and what does it mean?
Commodity derivative traders will need
to comply with new requirements on
position reporting and limits. Traders will
need to make available position reports
to trading venues (on an on-going
basis), and trading venues will need
to monitor this and enforce position
limits where necessary. Transaction
reporting requirements under EMIR
and MiFIR will also cover exchange
traded and eligible OTC derivative
contracts, setting up a web of reporting
requirements that traders will need to
comply with. However, the Commission
has recognised the overlap between
REMIT and MiFIR – any transaction
reports made under MiFIR will see any
equivalent obligations under REMIT
fulfilled.
The changes in this space will have a
number of potential impacts. Though
Article 2 (1) (k) in MiFID 1 has been
deleted, commodity traders may still be
able to make use of other exemptions.
Firms will need to closely analyse
this in consideration of their business
operations. Those who are caught will
need to consider whether they continue
these operations and become MiFID
compliant - with the costs that this will
entail - or restructure their organisations.
Increased reporting requirements
Reporting requirements under MiFID 2
will be dramatically widened in scope,
and necessitate significant changes to
business processes and technology
systems, and many core data sets
are still being defined by industry
working groups. Pre- and post-trade
requirements will apply to equity-like and
non-equity products. Transaction reports
will be required for these products
(including emission allowances), and
more details will need to be provided,
including the identity of the trader or the
algorithm responsible for the execution
decision, and any client details on whose
behalf the trade was made.
The changes to reporting under MiFID
will require a series of substantial
system overhauls for investment firms
and trading platforms alike. However,
opportunities exist: by driving synergies
in reporting requirements under EMIR,
MiFID, REMIT and MAD, firms will be
able to drive down costs and reduce
complexity.
© 2012 KPMG International Cooperative (“KPMG International”), a Swiss entity.
Member firms of the KPMG network of independent firms are affiliated with KPMG
International. KPMG International provides no client services. All rights reserved.
MiFID - what is it, and what does it mean? | 9
© 2012 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of
independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
10 | MiFID - what is it, and what does it mean?
More protection for investors
Changes to the investor
protection regime will
require investment firms to
consider how their current
policies fit with the proposed
requirements. In particular,
changes to the way in which
firms may provide investment
advice, receive fees, achieve
and report against best
execution, and treat eligible
counterparties will require
wholesale changes to their
approach. Firms will also
need to consider the interplay
between evolving national
requirements, such as the
UK’s Retail Distribution Review
(RDR), multiple European
initiatives including Packaged
Retail Investment Products
(PRIPs), and also the changes
that are occurring in the US
with the introduction of the
Consumer Financial Protection
Bureau (CFPB).
The impacts of these changes are
numerous. Changes to the way in which
firms must treat eligible counterparties
will result in a more onerous burden, and
may require changes to existing policies
and contracts. The ways in which firms
have to treat client money, report to
clients, and act in an independent way
will require full scale changes to the way
in which asset managers and retail banks
interact with their clients.
© 2012 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of
independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
MiFID - what is it, and what does it mean? | 11
Third country firms
New requirements for third
country firms
Changes to the third country regime
will impose significant barriers to
entry for firms outside the European
Union, and run the risk of reducing
the liquidity of Europe’s markets.
The Commission is proposing to
introduce a form of exemptive relief
for those firms operating in third
countries whose regulatory regime is
considered equivalent to the EU’s. The
Commission will set the parameters and
requirements for a third country to be
considered equivalent. Third countries’
regulatory regimes will need to be
deemed equivalent to the European
Union’s by the European Commission
before a third country firm can apply to
undertake investment services within
the EU. This will need to be done before
a third country firm can establish a
Recognition of equivalence by the
Commission of a third country’s
regulatory regime may be extended
– particularly where the supervisory
regime, and regulation of market
The third country requirements under
abuse, is significantly different to that
EMIR proved highly controversial during
of the EU. Agreeing Memorandums of
negotiations between the Parliament and
Understanding (MoUs) between ESMA
the Council in their trialogue discussions.
and the supervisory authorities in the
It will therefore be interesting to see
third countries once this is done could
how these negotiations progress for
also be another significant hurdle and
MiFID.
prove time consuming. It is likely that
these negotiations will take significantly
It is likely that third country firms will,
longer to conclude than the transitory
in the future, face significantly higher
period of four years currently written into
hurdles when seeking to conduct
the Commission’s proposal.
business in the EU. For example, they
will have to comply with higher levels of
market abuse rules and a more stringent
supervisory regime than may currently
exist in their country.
branch in the EU, for the purpose of
providing services to retail clients, or
can provide services from “off-shore” to
eligible counterparties.
© 2012 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of
independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
12 | MiFID - what is it, and what does it mean?
Trade lifecycle
Where regulation will impact
2
3
4
5
6
7
1
2
7
Trade
initiation
2
5
7
1
2
Trade
execution
Exchange
non-financial
counterparty
Bilateral
Other regulated
trading platform
Pre and post
trade reporting
Financial counterparty
7
8
2
Settlement
and clearing
3
4
5
6
7
8
Ongoing
management
CCP
Margin and collateral
Bilateral
Risk management
8
Close out
Trade
strategy
1
Asset servicing and
custody
Accounting
Transactions reporting
1. European Market Infrastructure
Regulation (EMIR)
– Standardise OTC and require central
clearing for standardised trades
– Higher margin and collateral
– Improved risk management
– Reporting to trade repositories
2. Markets in Financial Instruments
Directive (MiFID 2)
– Moves trading of standardised
derivatives on to exchanges or other
organised trading venues
– Creates a new ‘organised trading
facility’ to capture smaller broker to
broker networks
– Proposes major extensions to pre
and post trade transparency and
transaction reporting
– Specific reviews of commodity and
high frequency trading, with both
subject to heightened scrutiny,
including potential position limits or
forced reduction of positions
– Enhanced conduct rules with
significant increases in investor
protection
3. BASEL 2.5/3
– Increases capital for trading book
positions
– Additional capital for bilateral
derivatives trades
– New liquidity rules require larger
holdings of a limited pool of assets
which must also be used to satisfy
likely collateral rules
4. Fundamental review of trading
book
– Expected to reduce or remove capital
and financial accounting distinctions
between trading and banking
book, eliminating existing arbitrage
opportunities
5. Activities specific
– Commodities/High Frequency
Trading/Exchange Traded Funds
– Potential for further reporting,
additional supervision, position limits
or outright bans
– New European rules allow temporary
bans on short selling, and require
increased reporting
6 Market Abuse Directive (MAD)
– Currently covers disclosure of
interests, reporting of suspicious
transactions, maintenance of
insiders’ lists and accepted markets
practices
– New rules extend to derivatives
and commodities, including data
sanctions and HFT
– Scope across financial instruments
on MTFs and OFTs as well as OTC
– Issuers to disclose company specific
inside information
7. Dodd-Frank
– OTC trades standardised and traded
on exchange or newly formed swaps
execution facilities (SEFs)
– Derivatives trades should be cleared
through CCPs
– Additional margin and collateral will
apply to cleared and uncleared trades,
subject to segregation
– All trades reported to trade
repositories following confirmation –
and short time frames look likely
– Non-financials may be deemed
‘major swap participants’ and subject
to clearing, but can opt out if genuine
commercial hedge
– Many classes of swaps must be
‘pushed out’ of banks into separately
capitalised entities
8. Financial Market Infrastructures
(FMIs)/CSDs
– New global proposals to enhance
risk management and stability of
key market infrastructures, including
Central Securities Depositories,
Central Counterparties, and
payment systems
– Rules proposed/expected in US and
EU Autumn 2012
– Designate FMI as systemic and
subject to heightened supervision,
risk management requirements, and
systemic protections, e.g. living wills
and enhanced capital standards
– Emphasis on improved client asset
protection
© 2012 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of
independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
MiFID - what is it, and what does it mean? | 13
What can you do now?
Though the implementation of MiFID seems like a long way off – 2015 is the
expected due date – firms should act now to ensure that they are ready for the
changes, and in a position to drive competitive advantage by being first movers.
1 Conduct a strategic assessment.
This should include a high level
business assessment. KPMG firms
can help you determine the effects
of the changes on your business
operations, the effects on your
counterparty relationships and how
your competitors and operating
environment will be affected.
2 Do I stay, or do I go? Firms will be
faced with a stark choice - to exit
markets in which they operate, or to
adapt. KPMG can help firms with their
strategic decisions and advise
on market positioning.
3 Conduct deep business impact
assessments. In order to help with
the first two points, a deep business
impact assessment can help highlight
the processes and systems most
likely to be affected, where you are
currently compliant, and where there
are gaps. This will help you determine
the scale of the changes required.
4 Don’t focus on just one regulation
at a time. There are interdependent
themes that should be considered
across related regulations. Take a
wide view of the changes, consider
everything, and react decisively.
5 Don’t wait!System and process
changes take time to design and
implement – lead times must be
considered to ensure that any
changes can be implemented
successfully before you need to
become compliant with MiFID and
the other regulations. KPMG firms
can advise on the set up of your
programmes, technology solutions
and system changes.
6 Engage with the legislative process
now to understand the proposals,
determine the impacts, and enable
industry dialogue.
How are you affected?
Do you:
Trade commodity derivatives?
If you are not already, you may need
to become MiFID compliant, with
the additional reporting and capital
requirements that this will entail.
Engage in algorithmic trading?
It doesn’t matter whether you are
trading your proprietary capital
(in which case you will probably
need to become authorised), or a
sell-side broker. If you engage in
algorithmic trading, you will need to
post continuous quotes and provide
descriptions of your algorithms, whilst
beefing up your systems and controls.
Trade OTC? Expect higher costs
as eligible OTC contracts move to
become exchange traded and are
centrally cleared.
Provide investment advice?
You will need to consider whether
the advice is independent or not, not
cross-sell, and think about how you
charge for your services.
Cross internal order flows? If you
operate a broker crossing network,
or other equivalent models, you will
almost certainly have to register
as an OTF (and therefore not cross
your client flow with your proprietary
capital), or become a systematic
internaliser.
Execute client orders? You will need
to think about how you achieve and
report against best execution.
Provide investment services from
outside the EU? You will be faced
with significantly higher hurdles than
is currently the case, and will need to
re-evaluate the way in which you will
do this in the future.
© 2012 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of
independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
14 | MiFID - what is it, and what does it mean?
Taking a thematic approach
to MiFID and regulatory change
MiFID provides the context for a number of new regulations that will impact firms
differently according to their business model. To drive an efficient regulatory change
agenda, it is important that firms identify at an early stage which regulations they will
need to comply with, determine how their business will be impacted, and effectively
map a regulatory change pathway through the Governance, Operations and Technology
requirements. It is vital to understand the resulting threats and opportunities for your
business strategy and structure.
A thematic approach will ensure firms
are able to adapt their business models
in a way that drives value across the
regulatory change horizon - while ensuring
full compliance with the spirit and intent of
the rules. Using this approach, a number
of consistent themes that run across the
regulations can be identified, together
with a much better understanding of
their impacts on different parts of a firm’s
business model.
• Understand your business to determine
KPMG firms can help you apply these
how each theme may affect you.
themes to your business, identify
impacts, prioritise actions and structure an
• Determine the impacts on your current
integrated change management approach
change programme(s).
– delivering change that is effective,
• Help you prioritise your new regulatory
efficient and compliant. Our experienced
professionals:
change activities according to the
impacts on key business lines.
• Work through a decision tree to
determine which regulations are
• Help you budget, plan and implement
applicable to you.
an effective, risk-based change
management programme.
The regulatory change agenda – applying it throughout the organisation
Remuneration
Liquidity
Governance
Supervision
and
Regulatory
reporting
Customer base
Capital
Regulatory
Agenda
Customer
treatment
Structural
change
Financial Crime
Market
Infrastructure
Core
business
processes
Funding and
Financial
performance
Products &
Markets
Incentives &
Compensation
Governance
Control &
Reporting
Business
Model
Leadership
& Corporate
Culture
Infrastructur
e, Data &
Technology
Staffing,
Training &
Development
© 2012 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of
independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
MiFID - what is it, and what does it mean? | 15
© 2012 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of
independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
For further information
please contact
Giles Williams
Partner, Financial Services
Regulatory Centre of Excellence,
EMA region
KPMG in the UK
T: +44 20 7311 5354
E: giles.williams@kpmg.co.uk
Kara Cauter
Director, Financial Services
Regulatory Centre of Excellence,
EMA region
KPMG in the UK
T: + 44 20 7311 6151
E: kara.cauter@kpmg.co.uk
Chris Collins
Director, Risk Consulting
Financial Risk Management
KPMG in the UK
T: + 44 20 7964 4219
E: chris.collins@kpmg.co.uk
Marius Floca
Principal Advisor, Financial Services
Management Consulting
KPMG in the UK
T: +44 20 7694 2282
E: marius.floca@kpmg.co.uk
Sophie Sotil
Senior Manager
Financial Sevices
KPMG in France
T: +349 1456 3488
E: ssotil@kpmg.fr
Marcel Aellen
Dr.iur. Attorney at Law
Senior Manager
Audit Financial Services
KPMG in Switzerland
T: +41 44 249 45 97 (Office Zurich)
T: +41 31 384 77 35 (Office Berne)
E: maellen@kpmg.com
Chris Leonard-Appleton
Regulatory Advisor, Risk Consulting
Financial Risk Management
KPMG in the UK
T: +44 20 7694 5800
E: chris.leonard-appleton@kpmg.co.uk
Dr. Markus Lange
Partner, Head of Financial Services Legal
KPMG in Germany
T: +49 (0) 69 951195-530
E: markuslange@kpmg-law.com
Charles Muller
Partner, Financial Services
Regulatory Centre of Excellence,
EMA region
KPMG in Luxembourg
T: +35 2 22 51 51 7950
E: charles.muller@kpmg.lu
Pietro Stovigliano
Associate Partner, Financial Services
KPMG in Italy
T:+39 02 67643736
E: pstovigliano@kpmg.it
Rob Voster
Senior Manager, Financial Services
KPMG in the Netherlands
T: +31 (0)20 656 8439
E: voster.rob@kpmg.nl
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual
or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information
is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information
without appropriate professional advice after a thorough examination of the particular situation.
© 2012 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent
firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to
obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such
authority to obligate or bind any member firm. All rights reserved. Printed in United Kingdom.
The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International..
www.kpmg.com/regulatorychallenges
RR Donnelley | RRD-265261 | February 2012