This post references articles originally written by Eva Szalay for the Financial Time, published on May 15, 2019 and Patricia Kowsmann for Market Watch, published on May 16, 2019.
Backed by the Association for Financial Markets in Europe (AFME), global banks are fighting MiFID regulation requiring them to disclose information regarding foreign exchange markups and costs to clients. MiFID II (Markets in Financial Instruments Directive) was introduced early last year to encourage transparency between banks and clients, emphasizing the importance of maintaining the integrity of investors, consumers, and businesses when it comes to foreign exchange financial services. However, that is not all MiFID II does. “MiFID II is designed to offer greater protection for investors and inject more transparency to all asset classes”, reports the Financial Times; this means MiFID II will affect equities, fixed income, exchange traded funds, and foreign exchange.
Reluctant banks feel the new regulations carry heavy and unnecessary costs, they also find it unnecessary to provide such inclusive information to clients.
According to Financial Times, the AFME plans to “urge regulators to make an exemption of wholesale forex transactions and professional clients” from MiFID II rules. Banks feel an exemption is suitable for the wholesale forex market because they are already required to provide thorough reports to professional clients. However, it has now come to light that MiFID’s transparency rule applies only to liquid bonds; it is unclear if this clarification will affect AFME’s requests.
The pushback comes amid news the EU is fining five global banks for foreign exchange misconduct. The banks in question are accused of manipulating the foreign-currency market. This announcement, along with AFME’s desire for exemptions, demonstrates the importance of client-bank trust especially as it relates to FX markups. In turn, this highlights the advantages of FX Rate Integrity®.
For more information on MiFID pushbacks, read the Financial Times.
In addition, read more on EU fines on big banks.
-Paola Gasca, Analyst