You must have been not paying attention to current affairs in the investment industry if you have not at least heard about the heavily discussed regulation facing all financial service firms. The MiFID II/MiFIR is due to be implemented by 3rd January 2018 and it aims to increase the efficiency and transparency of the financial markets within Europe, in addition to boosting the protection of investors.
There have been numerous publications written on the topic; however, the aim of this article is to look at MiFID II from a different perspective - from a skills gap perspective.
Due to the complexity of MiFID II, besides its wide coverage of the financial sector, you would correctly assume the demand for the properly-skilled far exceeds the supply. In London alone there are 1600 organizations that are impacted by MiFID II and need professionals for their implementation teams. Depending on the size of the organization, the MiFID II change team can be comprised of anywhere from five individuals to hundreds of people. I will below discuss the main concerns that could potentially affect in one way or another the delivery of MiFID II.
It is often thought that general regulatory change experience is enough to deliver MiFID II successfully, but the opposite is true. The main concern is the time constraints and the efficiency that MiFID II delivery teams should work towards. In other words, there is only a year left until the deadline and therefore the hiring and training of inexperienced staff is just not a realistic option. Hence new employees must be up to speed with the given regulation and ideally should be specialized in one of the core areas. This means that a strong knowledge of a particular part of a stream is necessary. The predictions for 2017 point towards the necessity of having the experience within Cost & Charges and HFT & Algo Trading streams. Moreover, Transaction Reporting is still widely required. Furthermore, having specific asset class knowledge and experience is often necessary.
According to a MiFID II expert, there is also a risk in connecting the regulatory experts with the business. There seem to be a lot of disjointed conversations across the banks. For example, certain aspects of MiFID II impact the frontline businesses in a major way. From a regulatory perspective, consultants and compliance teams lack the skill set in advising the front office of the necessary changes to implement MiFID II. The shortage of skills, in particular, are the lack of business experience and the difficulty in translating the legislation into practical solutions. Moreover, it is often forgotten that MiFID II experts took years to build up the knowledge and now are required to translate this information to the front office in a very short period of time.
MiFID II employees lack the skills that allow them to operate simultaneously on business and technological requirements (data and systems) as well as understanding the legal requirements; these requirements make the implementation of MiFID II/MiFIR both slow and disorganized.