What will a Brexit mean for our continued implementation of MAR and MiFID II related systems and processes? Not much really. Let’s look at what we know around timescales: MAR is active on July 3, 2016 and MiFID II is scheduled to be active on January 3, 2018. For the U.K. government to trigger Article 50, let’s assume January 2017.
With two years of negotiations to agree the terms of Brexit, and to agree the U.K.’s continued relationship with the remaining EU, there will be no changes implemented during these two years, which takes us to January 2019. Then the implementation of that agreement starts. We don’t know how many years that will take, but it’s safe to say it will be a lengthy process given the sheer volume of laws and treaties that needs to be reviewed and changed.
So, keep calm and carry on with your implementation of MAR related systems and processes, and continue your risk analysis of what’s known about MiFID II, and keep giving input to ESMA about its technical advice.
Depending on what negotiation results we have following an Article 50, we can broadly see three different scenarios:
- The U.K. joins the EEA (the “Norwegian model”). We would continue to fall under MAR and MiFID II, and no additional work will be required.
- The U.K. and the EU agrees a bilateral trade agreement that includes goods and services. We will only know the details of the impact after negotiations are concluded. Will financial services be pass-ported, and if so under what conditions? Will we implement a like-for-like regulatory passport, or will we have a U.K. domestic set of regulation, and we need to comply with MAR and MiFID II for anything offered across our borders with the EU? This option will require the U.K. to write its own equivalents to MAR and MiFID II, but the extent of the required changes depends on the nature of the bilateral agreement that’s struck.
- The U.K. and the EU does not strike any specific agreement, but our relationship is governed by existing international trade agreements under the WTO. In this scenario we will need to write our own domestic versions of MAR and MiFID II. We would have to comply with EU regulation for any cross border transactions. This option would potentially mean the most amount of work because once our U.K.-based regulation is finalized, it will need to be fully implemented.
What is clear is that we will live with EU regulations for years to come, regardless what the negotiation results under Article 50 will bring. So do the most you can of the remaining time of influencing EU-wide regulations and be active in the formation of TRS’s. We will be impacted by these post Brexit, like it or not.