New EU financial market rules designed to protect consumers are having an uneven impact on smaller advisers and may even lead to the extinction of niche players who are unable to free themselves from the red tape. The Markets in Financial Instruments Directive II, or MiFID II, has been in place for just two months and is already sparking consolidation, concentrating power among major financial institutions.
“We’re seeing the first signs of impact on the business models of the smaller providers in the market — be they advisers or fund firms,” said Bernhard Langer, chief investment strategist of US investment management firm Invesco in Germany. “Given the high costs that MiFID II entails, they’re reviewing their business models and have to consider whether it’s worth carrying on.”
MiFID II’s introduction has progressed more smoothly than expected, most market participants agree, despite the scale of the directive. But that’s not to say everything is up and running now. There are persistent delays and hitches and, in Germany, online banks in particular have struggled to meet the requirements. ING-Diba, a subsidiary of Dutch bank ING, in January pulled some 80,000 derivatives from its offerings until it can comply with the new rules.