MiFID Likely To Increase Consolidation, Outsourcing, Report Suggests

by Ulrika Lomas, for LawAndTax-news.com, Brussels

08 August 2005

Research and advisory firm, Financial Insights on Thursday released a new report focusing on the recent European regulation, the MiFID (Markets in Financial Instruments Directive), that will create a single European capital market and is scheduled to apply in 25 EU Member States, through April 2007.

In its report, Financial Insights predicted that the MiFID will generate an increase in liquidity and competition across the whole of the supply chain, with particular growth in multilateral trading facilities (MTFs) and electronic trading networks.

In addition to this, through consolidation, the report suggested that midsize investment banks will begin to achieve real economies of scale and scope and sustain their positions, while mergers and acquisitions between midsize or smaller brokers and fund managers will significantly increase in number from 2007 on.

Other effects of the MiFID forecasted by Financial Insights are that:

• Increased demand for outsourcing and application service provider (ASP) services will enable smaller participants to cope with the new regulatory requirements and the complex market structures that will follow;
• New demand will grow for real-time, multi-asset class, low-latency, nonstop trading technologies compliant with the emerging pan-European legislation; and
• New challenges for operational and system risk management will emerge from the market-led approach of the regulators.

"There are significant new opportunities, but also major threats offered by MiFID," Simona Macellari, research and consulting manager for Financial Insights observed, continuing:

"We are likely to see considerable consolidation by both market participants and technology vendors as firms jockey for position ahead of the implementation date."

Recommended