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Exchange giants land last-minute breather on Mifid II rule

Lucy Burton
Traders operate in the Ring, the open trading floor of the new London Metal Exchange (LME) in central London.  - AFP

The City watchdog has handed three global exchange giants a last-minute breather on a major piece of EU legislation that came into effect on Wednesday. 

Financial institutions have been scrabbling to comply with the sweeping markets reform, known as Mifid II, by Wednesday. The upheaval influences almost every part of the process for those involved in buying and selling shares and has been pegged as the biggest shake-up in the City since the 'Big Bang'  in the 1980s.  

Although the rules were already delayed by a year to give firms longer to prepare, regulators have told London Metal Exchange owner Hong Kong Exchanges and Clearing that they can have an extra 30 months to enforce one of the rules, alongside the Intercontinental Exchange's London-based Futures Europe arm and Deutsche Boerse's Eurex Clearing unit.

The last-minute reprieve from the UK and German regulators only relates to Mifid II's so-called open access rule, which is aimed at allowing investors to choose where to trade and clear their products rather than tying their activities to a specific venue. 

The Financial Conduct Authority only let the two London-based houses off the hook on the morning the rules were due to launch, saying in its statement that "having taken into account the risks" of applying the rule to the "orderly functioning of the trading venues" it had decided to green-light the delay. 

The London Stock Exchange has been a staunch supporter of Mifid II's open access rule. It said today that its open access approach "will continue".

German regulator Bafin granted Eurex extra time late on Tuesday, meanwhile. It is unclear if other European regulators will follow suit.

The delays will come as a blow to the London Stock Exchange, which has been a staunch supporter of the open access rule. An LSE spokesman said the exchange will continue with its open access approach in order to "promote greater choice" in financial markets. 

The goal with Mifid II is to heed the lessons learnt from the financial crisis, with the changes impacting huge swathes of the City, from changing how analysts' research is paid for to demanding more detailed information about trades. Although most firms are expected to be compliant today, City experts warn there's plenty more still to do