Banks urged to stay ahead of the MiFID game

Financial companies must ensure early compliance with directive, warn experts

The forthcoming Markets in Financial Instruments Directive (MiFID) will put significant pressure on IT departments in banking organisations, experts have warned.

The directive’s implementation date is 1 November 2007, but firms must ensure their systems are ready much earlier.

‘All systems need to be ready for testing by 1 March 2007 – just 13 months away,’ said Bob Fuller, an IT director at investment bank Dresdner Kleinwort Wasserstein and co-chairman of a MiFID joint working group.

‘Financial services IT firms will face significant challenges and nobody has the answers. This needs collaboration.’

MiFID requires investment firms to implement a number of changes in how they operate, such as transaction reporting and the retention of trading information for up to five years.

The directive is a major part of wider EU plans to create a single market for financial services.

To comply in time, firms must be prepared to increase spending on IT, while IT departments will face a shortage of skilled staff, says Fuller.

‘Most of the changes will be IT changes. The longer you leave it, the more it will cost you. IT is a function of money, time and complexity,’ he said.

‘MiFID assumes that IT works 24/7, and doesn’t say what happens if it fails.
‘You have to deliver 100 per cent availability on your systems if you want to keep your job in the new world.’

Hector Sants, managing director for wholesale business at the Financial Services Authority (FSA), says investment firms must take immediate action.

‘The implementation of the directive is a major challenge, both for the FSA and for industry, and while November 2007 may seem a long way off, preparing to meet the challenge cannot begin soon enough,’ he said.