Warsaw
29 June 2017
Reporter: Stephanie Palmer
MiFID II a threat to market liquidity
New rules under the second Markets in Financial Instruments Directive (MiFID II) could restrict liquidity in the market and have a negative effect on securities lending and repo industry, according to Anna Biala, a partner at Clifford Chance.

Speaking at The Network Forum in Warsaw, Biala highlighted some of the challenges of MiFID II that could affect custodians, including pointing out that the directive prohibits title transfer collateral arrangements with retail clients.

She said it is currently unclear as to whether this includes securities lending and repo transactions, adding: “It seems that that was not the intention of the legislators.”

However, Biala pointed to restrictions relating to these arrangements with professional clients. If an investment firm wants to enter into a title transfer collateral arrangement with a professional client, it is required to consider the use of the transfer “in the context of the situation”, taking into account the “client’s obligation to the firm and the assets that are subject to the title transfer collateral arrangements”.

The firm must also provide “additional warning” around what the effect of the arrangement may be—a requirement that Biala called “surprising”.

She concluded that custodians should consider that “the new rules might have an impact on securities lending and repo transactions”, and a wider effect on the market.

“[MiFID II] might impact market liquidity,” she warned.

Segregation rules under the directive are quite restrictive, and “the risk is that this will disrupt the flow of collateral in the financial systems, which is quite problematic bearing in mind that various regulations now require additional collateral”.

More regulation news
The latest news from Asset Servicing Times
Join Our Newsletter

Sign up today and never
miss the latest news or an issue again

Subscribe now
Clearstream sets sights on CSDR licence
17 July 2017 | Frankfurt | Reporter: Drew Nicol
Deutsche Börse subsidiary Clearstream is set to apply for new licenses to operate under the central securities depositories regulation
Fend off reform fatigue, urges FSB
06 July 2017 | Hamburg | Reporter: Mark Dugdale
The Financial Stability Board has called on the leaders of G20 nations to fend off reform fatigue and continue to work together
ESAs set the KID straight
05 July 2017 | London | Reporter: Stephanie Palmer
The European Supervisory Authorities have clarified some of the finer points around the Key Information Document required under the Packaged Retail and Insurance-based Investment Products Regulation
FCA reveals final MiFID II rules
04 July 2017 | London | Reporter: Stephanie Palmer
The authority has set out the ways in which the UK's policy will go beyond the requirements of the directive, but noted that it has an obligation to consider the government’s economic policies
MiFID II a threat to market liquidity
29 June 2017 | Warsaw | Reporter: Stephanie Palmer
New rules under MiFID II could restrict liquidity in the market and have a negative effect on securities lending and repo industry, according to Anna Biala, a partner at Clifford Chance
MiFID II unbundling compliance will be last-minute scramble for 85 percent
23 June 2017 | London | Reporter: Stephanie Palmer
Asset managers are cutting it fine in compliance with research unbundling rules under MiFID II, with 85 percent saying they expect to be compliant in Q4 2017 or later, ahead of the January 2018 deadline
ICMA: NSFR will make EU repo less attractive
23 June 2017 | London | Reporter: Drew Nicol
The association also point to increased automation of highly manual and labour-intensive processes of the market as a way to mitigate rising costs and create efficiencies
More regulation news