Not surprising to see that it now looks odds-on that we’ll get a full one year delay on the implementation of MiFID 2. This will embarrass the politicians who don’t want to be seen as going soft on those “reckless” bankers, but I assume Jo Public will have forgotten all about this by the time they’re up for re-election in 2019. It’s worth bearing in mind, however, that the original aim of MiFID 1 back in 2007 was simple – make it easier to trade equities across European borders. Post financial crisis and the whole process became highly politicised and was skewed towards extracting retribution from the industry and ensuring that systemic risk was removed from the system. This ignored the simple fact that risk in capital markets can never be erased, it can only ever be moved to another part of the system. Naturally the regulators will worry that a delay might mean all their hard work gets unpicked, but perhaps a delay now is better than charging ahead with something that even ESMA says it would struggle to prepare for in time.
Meanwhile, when it comes to the looming liquidity crisis in fixed income, everyone seems to be looking the other way. The financial pressure being put on banks means that they can no longer afford to warehouse liquidity risk and so it is being dumped on the buy-side. It will be ironic (to say the least) if we enter the next global financial crisis before we have sorted out the last one.