- 75% of respondents aware of MiFID II claimed knowledge of the compliance deadline, however two thirds (66%) got the deadline wrong when asked, most choosing dates later in 2018
- Most (89%) of those aware of regulations are taking steps towards compliance
- Fewer than a third (32%) believe using Coordinated Universal Time (UTC) via fibre links is the correct method to ensure compliance, despite it being the only way to guarantee compliance without further monitoring or calibration
- GPS timestamping is most popular method used by industry, despite 79% of users experiencing issues timestamping trades with it
New research from NPL, the UK’s National Measurement Institute, has shown a lack of awareness in the UK financial services sector around the new European Markets in Financial Instruments Directive (MiFID II) ahead of its imminent deadline and many firms may fall short of compliance by employing inefficient means of timestamping.
The regulation, set to be implemented on 3 January 2018 will aim to provide harmonised regulation to improve transparency in trading across the European Economic Area and includes regulatory technical standards (RTS 25) that will require all trades to be timestamped to Coordinated Universal Time (UTC) with a high level of precision. Timestamps will need to be accurate to within a 100 microseconds of UTC for high frequency trading (HFT) – those noncompliant with MiFID II will risk fines of up to 5 million euros, or 10% of global turnover.
According to the report, top line awareness of MiFID II is high, with 91% of those surveyed aware of the regulation itself. 75% of those claimed to know the deadline for compliance, but when asked to choose from a range of dates, two thirds (66%) chose incorrectly. Most chose dates later than the deadline meaning they would miss this, highlighting a need for further education across the industry.
The research, facilitated by Censuswide, was based on responses from 200 professionals responsible for operations and/or regulatory compliance in the UK finance sector, including banks, hedge funds, analyst firms, investment management/advice and data centres. It demonstrates a clear will from industry to become compliant, with 89% of those aware of the regulations taking steps towards compliance. However, according to the survey, the most common method currently used for timestamping is Network Time Protocol-based Internet Time, with more than half of respondents (56%) employing it. This is only accurate to the tenth of a second and, while able to accommodate the requirements for human trading, such as over the phone and online, it cannot remain a solution for HFT and non-HFT, as these require 100 microsecond and one millisecond accuracy respectively under RTS 25.
The survey also highlighted the continued reliance on GPS for timestamping, with 14% of financial services professionals responding using it, despite the majority (79%) of those experiencing issues doing so, such as drop out, loss of accuracy, lack of synchronisation and leap second issues. GPS can be vulnerable tojamming and loss of signal, and can only ensure compliance with continual monitoring and calibration to ensure that it is traceable back to UTC.
The ideal method to deliver a precise time signal guaranteeing the accuracy required for RTS 25 is UTC delivery by fibre from a national timing institute. Research has shown fibre optics are capable of achievingaccuracy better than 100 nanoseconds. However, while a fifth of respondents are using this method to keep to time (21%), only around a third (32%) of those taking steps towards compliance said they believed this to be the correct method to adopt – meaning firms could find their upgrades will still see them falling short of the regulations.
Dr Leon Lobo, Strategic Business Development Manager, NPL, said:
“It is encouraging to see an understanding of the magnitude of the new regulations and a clear will from the UK finance industry to shape up for the regulation. However, what is equally important is to ensure that the efforts of industry are not wasted and there is a clear grasp of what level of accuracy constitutes compliance.
“Many of the current methods are problematic and opting to improve these will not guarantee the highly-accurate time standard which will ensure timestamps are easily certified. At NPL, the home of the UK’s national timescale, we provide the only precise time dissemination solution that is directly and physically connected to UTC – and that gives users confidence in their compliance, without additional monitoring and calibration needs or costs. NPLTime® is perfectly placed to meet the ever-increasing demand for precise timing ahead of MiFID II implementation in January 2018.”
Sunak warns of bill to be paid to tackle Britain’s ‘exposed’ finances – FT
(Reuters) – British finance minister Rishi Sunak will use the budget next week to level with the public over the “enormous strains” in the country’s finances, warning that a bill will have to be paid after further coronavirus support, according to an interview with the Financial Times.
Sunak told the newspaper there was an immediate need to spend more to protect jobs as the UK emerged from COVID-19, but warned that Britain’s finances were now “exposed.”
UK exposure to a rise of one percentage point across all interest rates was 25 billion pounds ($34.83 billion) a year to the government’s cost of servicing its debt, Sunak told FT.
“That (is) why I talk about leveling with people about the public finances (challenges) and our plans to address them,” he said.
The government has already spent more than 280 billion pounds in coronavirus relief and tax cuts this year, and his March 3 budget will likely include a new round of spending to prop up the economy during what he hopes will be the last phase of lockdown.
He is also expected to announce a new mortgage scheme targeted at people with small deposits, the UK’s Treasury announced late on Friday.
Additionally, the government will also announce a new 100 million pound task force to crack-down on COVID-19 fraudsters exploiting government support schemes, it said.
(Reporting by Bhargav Acharya in Bengaluru; Editing by Leslie Adler and Cynthia Osterman)
G20 promises no let-up in stimulus, sees tax deal by summer
By Gavin Jones and Jan Strupczewski
ROME/BRUSSELS (Reuters) – The world’s financial leaders agreed on Friday to maintain expansionary policies to help economies survive the effects of COVID-19, and committed to a more multilateral approach to the twin coronavirus and economic crises.
The Italian presidency of the G20 group of the world’s top economies said the gathering of finance chiefs had pledged to work more closely to accelerate a still fragile and uneven recovery.
“We agreed that any premature withdrawal of fiscal and monetary support should be avoided,” Daniele Franco, Italy’s finance minister, told a news conference after the videolinked meeting held by the G20 finance ministers and central bankers.
The United States is readying $1.9 trillion in fiscal stimulus and the European Union has already put together more than 3 trillion euros ($3.63 trillion) to keep its economies through lockdowns.
But despite the large sums, problems with the global rollout of vaccines and the emergence of new coronavirus variants mean the future path of the recovery remains uncertain.
The G20 is “committed to scaling up international coordination to tackle current global challenges by adopting a stronger multilateral approach and focusing on a set of core priorities,” the Italian presidency said in a statement.
The meeting was the first since Joe Biden – who pledged to rebuild U.S. cooperation in international bodies – U.S. president, and significant progress appeared to have been made on the thorny issue of taxation of multinational companies, particularly web giants like Google, Amazon and Facebook.
U.S. Treasury Secretary Janet Yellen told the G20 Washington had dropped the Trump administration’s proposal to let some companies opt out of new global digital tax rules, raising hopes for an agreement by summer.
“GIANT STEP FORWARD”
The move was hailed as a major breakthrough by Germany’s Finance Minister Olaf Scholz and his French counterpart Bruno Le Maire.
Scholz said Yellen told the G20 officials that Washington also planned to reform U.S. minimum tax regulations in line with an OECD proposal for a global effective minimum tax.
“This is a giant step forward,” Scholz said.
Italy’s Franco said the new U.S. stance should pave the way to an overarching deal on taxation of multinationals at a G20 meeting of finance chiefs in Venice in July.
The G20 also discussed how to help the world’s poorest countries, whose economies are being disproportionately hit by the crisis.
On this front there was broad support for boosting the capital of the International Monetary Fund to help it provide more loans, but no concrete numbers were proposed.
To give itself more firepower, the Fund proposed last year to increase its war chest by $500 billion in the IMF’s own currency called the Special Drawing Rights (SDR), but the idea was blocked by Trump.
“There was no discussion on specific amounts of SDRs,” Franco said, adding that the issue would be looked at again on the basis of a proposal prepared by the IMF for April.
While the IMF sees the U.S. economy returning to pre-crisis levels at the end of this year, it may take Europe until the middle of 2022 to reach that point.
The recovery is fragile elsewhere too. Factory activity in China grew at the slowest pace in five months in January, and in Japan fourth quarter growth slowed from the previous quarter.
Some countries had expressed hopes the G20 may extend a suspension of debt servicing costs for the poorest countries beyond June, but no decision was taken.
The issue will be discussed at the next meeting, Franco said.
(Additional reporting by Andrea Shalal in Washington Michael Nienaber in Berlin and Crispian Balmer in Rome; editing by John Stonestreet)
Bank of England’s Haldane says inflation “tiger” is prowling
By Andy Bruce and David Milliken
LONDON (Reuters) – Bank of England Chief Economist Andy Haldane warned on Friday that an inflationary “tiger” had woken up and could prove difficult to tame as the economy recovers from the COVID-19 pandemic, potentially requiring the BoE to take action.
In a clear break from other members of the Monetary Policy Committee (MPC) who are more relaxed about the outlook for consumer prices, Haldane called inflation a “tiger (that) has been stirred by the extraordinary events and policy actions of the past 12 months”.
“People are right to caution about the risks of central banks acting too conservatively by tightening policy prematurely,” Haldane said in a speech published online. “But, for me, the greater risk at present is of central bank complacency allowing the inflationary (big) cat out of the bag.”
Haldane’s comments prompted British government bond prices to fall to their lowest level in almost a year and sterling to rise as he warned that investors may not be adequately positioned for the risk of higher inflation or BoE rates.
“There is a tangible risk inflation proves more difficult to tame, requiring monetary policymakers to act more assertively than is currently priced into financial markets,” Haldane said.
He pointed to the BoE’s latest estimate of slack in Britain’s economy, which was much smaller and likely to be less persistent than after the 2008 financial crisis, leaving less room for the economy to grow before generating price pressures.
Haldane also cited a glut of savings built by businesses and households during the pandemic that could be unleashed in the form of higher spending, as well as the government’s extensive fiscal response to the pandemic and other factors.
Disinflationary forces could return if risks from COVID-19 or other sources proved more persistent than expected, he said.
But in Haldane’s judgement, inflation risked overshooting the BoE’s 2% target for a sustained period – in contrast to its official forecasts published early this month that showed only a very small overshoot in 2022 and early 2023.
Haldane’s comments put him at the most hawkish end among the nine members of the MPC.
Deputy Governor Dave Ramsden on Friday said risks to UK inflation were broadly balanced.
“I see inflation expectations – whatever measure you look at – well anchored,” Ramsden said following a speech given online, echoing comments from fellow deputy governor Ben Broadbent on Wednesday.
(Editing by Larry King and John Stonestreet)
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