The implementation of the MiFID II legislation continues nearly a decade of continuous regulatory evolution, creating a reflective environment for financial companies across Europe. With the application date this week, firms accelerated their implementation plans to ensure that their business are compliant with the new rules.
For Nasdaq, as a global exchange and technology provider, the implementation of MiFID II has been ongoing for many years starting during the drafting of the initial regulations. Nasdaq supports the ambition of MiFID II to increase investor protection, fairness and transparency within European markets. It has been important for Nasdaq to be highly involved to support and influence the decision-making during the drafting and enforcement of this large piece of legislation.
Activities were taken early in the drafting process together with stakeholders and industry organizations to ensure that the legislation wouldn't hinder the function and development of European markets. With many business activities throughout the continent, Nasdaq has continuously influenced the formulation of the new regulatory framework, whether regionally or at a national level. In particular, the company has responded to consultations and being active in the dialogue with both national competent authorities and governments. The company has been forthright to convey its insights and understanding of the dynamics in the market between the marketplace, issuers and different categories of investors.
MiFID II is comprehensive and applies across several areas in the trading landscape effecting nearly all market segments and participants direct or indirect. As a trading venue, Nasdaq has the important role of being a guardian of the market function. Due to this role, especially within the Nordic markets, Nasdaq has highly prioritized the need to be in compliance with MiFID II, well in advance of this week's application date of 3 January 2018. In particular, Nasdaq worked with the Nordic regulatory authorities to provide a MiFID II self-assessment that provided a demonstration of compliance already in the 3rd quarter of 2017.
In order for Nasdaq to accomplish compliance with the new rules and to enhance or develop functionality for its systems the company uses and also sells, Nasdaq has carried through and continues to operate an extensive business project for the MiFID II implementation. The project has been running since MiFID II entered into force and is divided into different business segments covering all business units and all of the markets the company serves.
Different business units within the project collaborated with the Nasdaq legal and compliance teams to identify regulatory gaps and create compliant technical solutions to meet the objectives and goals of the legislation. An important factor to reach compliance was handling the external MiFID II dependencies Nasdaq has with regards to its members and the providers of data or services. To secure necessary information and data, a comprehensive Member Readiness Program was included in the MiFID II implementation process. This program consists of activities like webinars, roadshows, regulatory newsletters and direct communication with members and their clients.
From Nasdaq's perspective it has been important to bring our understanding of the new rules and its implications to market participants and our members. The compliance and legal team received, interpreted and answered nearly 200 questions from members and its own organization and compiled them to create an internal Q&A documentation to be used in our Member Readiness Program and for ongoing consultations with the market and regulators.
Nasdaq continues to place a great deal of effort into reducing the remaining outstanding questions and to find solutions in cases where more guidance from regulators is needed. Also, the company continues to seek engagement with relevant stakeholders and the European regulators to clarify relevant MiFID II topics.
Nasdaq has worked diligently to adapt its business to the new market conditions within data reporting and transparency. The company has created solutions for market participants to remain good actors through the implementation of forward-looking technologies and services. Nasdaq continues to expand its existing data reporting services and has applied to specific regional and national regulatory bodies to become both an APA and ARM in order to cater to client requirements for reporting information.
Nasdaq has closely followed the development from the increased transparency on non-equity and equity instruments and has already implemented and rolled out new trading functionalities such as Auction On Demand (AOD) and Nordic LIS (Large-In-Scale) Block, on our equity secondary markets. Nasdaq is also considering to obtain a SME Growth Markets status for its Nordic equity MTFs if that would further support the possibility for smaller enterprises to raise capital from investors.
MiFID II will lead to significant regulatory challenges that companies must take into consideration when they enter the public markets. Nasdaq operates at the intersection of the capital markets and the economy and supports the principals of the capital markets union. The company believes that constructive interactions with the capital markets ultimately creates jobs and leads to economic prosperity. Nasdaq will continue to engage in public policy debate to ensure that the principles of well-functioning markets, and those issues most prevalent for listed companies and other market participants, are being heard.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.