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Don't let MiFID delays stop IT work
Short deadline will cause skills shortage, says IT chief

By Steve Ranger

Published: Tuesday 31 January 2006

Delays to political process around MiFID are no excuse to delay IT work on implementing this European financial directive, experts have warned.

But the limited time remaining to prepare for the directive could leave banks facing big bills for IT work and create a skills shortage as financial services organisations try to poach the best tech staff to get their systems ready in time.

The Markets in Financial Instruments Directive - MiFID - aims to create a single market for financial services across Europe, lowering the costs for banks to do business in other countries.

Banks will have to spend big to get their IT systems in place to cope with the change - analyst TowerGroup predicts that a typical medium-sized European broker will have to spend $22m to get compliant - although on the plus side all this spending will lead to $1.5m in annual savings.

But the Level 2 implementation measures for MiFID - which provide the actual detail of what companies will have to do to comply - still haven't appeared.

They were expected this month but it now looks like they will be stuck in the European political sausage-machine until the summer.

And speaking at the Finexpo show in London last week Chris Skinner, research director at TowerGroup, said there is still not enough information available: "No one knows what this thing is yet but you have to comply within 18 months. The final wording hasn't been written yet."

Delays to the detailed requirements could shunt the final deadline for MiFID implementation forward by months, he predicted.

Skinner said: "All of these dates have been moving backwards," so the current compliance deadline of November 2007 could lapse.

He said: "I think it will be April 2008."

But Bob Fuller, IT director for IT strategy at investment bank Dresdner Kleinwort Wasserstein, said that while the implementation guidelines have been delayed again that simply means companies will have less time to get the work done.

Fuller, also co-chair of the MiFID joint working group on IT, told the conference: "We've seen a lot of politics around it but it's not going to go away. The time for implementation is getting very short and getting shorter by the day."

Companies need to get moving now, he said, and IT is going to be facing the brunt of the work.

Fuller said: "There will be a lot more pressure on high availability and scalability and that's an IT challenge."

A short compliance timeframe for such a vital deadline could spark a skills shortage as banks try to grab top staff, he warned.

He said: "You are talking about changing front-office IT that is most probably five-years-old and based on the latest technologies. We are going to see a skills shortage. How are you going to keep your permanent staff? If they are any good they are going to get poached."

And rather than the deadline getting further away, when you add testing to the mix, banks have even less time to get ready, he said: "You will need six months' testing - you'd better have your systems up and ready for testing by March 2007 - that's 13 months away. This is a big challenge."

And even though MiFID may not be in place across Europe by the end of next year, it will almost certainly be up and running in the UK.

While Stephen Hanks, economic advisor in the capital markets and governance team at the Treasury, admitted "MiFID is coming but it's coming slowly", he added "in the UK we are aiming to make the deadline".

And Dermot Turing, partner at law firm Clifford Chance, warned companies the UK has an "outstanding" record of getting these directives implemented on time: "Do not rely on the UK being late - do not use this as an excuse to put off planning. You have to be ready for MiFID on 1 November 2007."

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