A staggering 95% of financial services firms predict that the capital markets industry will be hit by a wave of punitive fines for failing to comply with the pan-European Markets in Financial Instruments Directive (MiFID), a “worrying” survey has found.

 According to an IFR Market Intelligence report, commissioned by capital markets news analysis service Thomson IFR and carried out by the Joint Working Group IT Think Tank (JWG-IT), there remains “widespread confusion” regarding the requirements of the IT-driven Directive, which is effective from November 1, 2007. Readiness across the industry varies considerably, says the report, with many compliance departments simply “unaware of their true position”.

First outlined by the European Commission in April 2004, MiFID aims to increase the transparency, competitiveness and fairness, of European financial markets. In April, the European Commission said it had started legal proceedings against 24 European member states for failing to meet the Directive’s first deadline of January 1, 2007.

According to PJ Di Giammarino, CEO of JWG-IT and author of the report, a large number of firms have failed to acknowledge the seriousness of the Directive which represents an “enormous change” to the capital markets industry.

In particular, the investment banking industry – the sector hardest hit by the Directive – is “feeling the heat across all the change drivers”, Di Giammarino says in the report. For many such organisations MiFID has proved particularly challenging because it offers “no comprehensive instructions for the firm or the regulator, and the industry faces significant ‘known unknowns,” says Nicholas Child head of EMEA Markets Compliance at Citigroup Global Markets.

According to Di Giammarino the vendor community is also partly culpable for the industry’s current state of confusion. “There has been a noticeable lack of real activity from the vendor marketplace in terms of coming up with MiFID ready compliance solutions,” he told Information Age.  

Speaking on behalf of vendor consortium the Open MiFID Alliance (OMA), Philip Filleul, MiFID Programme Manager at Sun Microsystems, refuted the accusation arguing that collaborative platforms such as the OMA have been “formed specifically to provide a menu of integrated technology solutions for MiFID.”

Firms now have fewer than 50 working days to become compliant.

Information Age analysis: MiFID means more

European Commission takes legal action over MiFID delays