MiFID II and GDPR Poised to Shake up Finance in 2018

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Back in the day, circa 1700, European financial regulations were mainly aimed at protecting the wealth and investments of the monarchy.  Today regulatory bodies have been designed to protect everyone, not only the super-rich. Regulation of the financial markets and the individuals that work within the industry have been under scrutiny for decades, however the spectacular meltdown of the markets in 2008, fast forwarded implementation of more stringent checks and balances. This means that the regulators have some major directives in store for 2018, writes Nikola Grozdanovic, FXTM’s Senior Staff Writer.

Eleana Massoura, Head of Compliance at FXTM, has welcomed the first of these directives which took effect on 3 January. “MiFID II builds on what last year’s MiFID regulation aimed to achieve, which is to make financial measures more transparent for institutional and retail investors,” explains Ms. Massoura. “We’ve had major regulatory changes impacting the industry ever since the big 2008 crisis, but there are still loopholes and behaviours that negatively impact an individual’s experience in the markets. With technology being the driver of most financial interactions, it’s more important than ever to have strict rules and guidelines that will keep both investors and firms in check.”

The second Markets in Financial Instruments Directive, is deemed to be one of the most important set of rules to come into effect in the past decade. It has taken the initial MiFID requirements of making institutional costs and charges known to the client before any accounts are opened and commitments have been signed, and expanded this to include tradable currencies, commodities and credit products. It has also introduced more stringent policies regarding client fund protection.

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So far the feedback on the regulation from brokers and other financial firms has been positive. Apart from a few hiccups over dark pools, which are isolated platforms that allow investors to trade heavy amounts without disclosing their intentions, the regulations have been well received.  In a little over four months’ time, we will be seeing another set of regulatory changes that are making financial firms brace for impact. The GDPR (General Data Protection Regulation) will apply from the 25th of May with the objective of tightening security measures around clients’ data protection within the EU. The purpose behind GDPR is to help consumers have more control over their personal data, as well as update any regulatory features for institutions that have an impact on consumer data – including location and online identifiers for verification purposes.

Clients will be expected to provide a lot of sensitive and personal information before making any monetary transactions, all of which will naturally be protected and secured under the GDPR. Institutions that fail to comply with this directive, which has been commissioned and approved by the European Parliament, the Council of the European Union and the European Commission – will face substantial fines (up to €20 million or 4% of global revenues, whichever is higher). Hence the jitters.

Ms. Massoura remains positive and hopeful. “The bottom line is that financial companies and other brokers should have had these client-protection policies in place a long time ago. I’m proud to say that FXTM is embracing MiFID II with open arms, and will do the same with GDPR in May, because we understand that these rules are ultimately designed to safeguard the consumer. This inevitably helps strengthen the products and services of the institution as well.”

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