The Post-MiFID Financial World

László SeregdiJune 15, 2007

Split

June 15, 2007 2

Agenda

1. Introduction of HFSA2. Main effects of MiFID3. Issues for integrated

supervisors4. Questions5. Conclusions

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Introduction of HFSAGovernment agency, separately from

NBHIntegrated supervisionFinanced by the industry Institution and market supervisionNearly 2000 institutions + individualsStaff: 500Supervisory CouncilMiFID implementation in Hungary

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Main effects of MiFID

1. Capital requirement + rules of internal procedures- this is a guiding principle also in banking and insurance sector- stronger internal regulation of service providers- more proactive, risk based supervision

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Main effects of MiFID2. Focused on client

- best execution (Elements of best execution (price, speed, type of transaction etc.), best execution policy, monitoring and review, new risk for service providers- client classification (suitability and appropriateness test)- transparency: need for a better financial culture and education

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Main effects of MiFID3. Need for a new supervisory approach

- Close connection (not only through examinations, information sharing)- Guidelines, transparent supervisory work- Examination of outsourced activity- Hungary: MiFID Panel, 6 meetings, consultations, problems, documents on internet, transaction reporting system

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Issues for integrated supervisors

1. Main principles can be used also in banking and insurance sector (best execution, transparency etc.)

2. Need for further harmonization: outsourcing, compliance officer, client classification, agents

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Common elements of MiFID and CRD

Requirements for managersInternal governance and risk

managementProportionalitySupervisory toolsTransparency (institutions and

supervisors)Co-operation between supervisory

authorities

Internalization- pricing

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Questions

1. Future role of MTFs and exchanges

2. Internalization (cost-benefit)3. Single passport (how to collect

data on activity)4. Effect on EU competitiveness

(strong regulation vs. higher administrative cost)

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Tasks of the institutions• Internal procedures, regulations• Compliance function• Decision on internalization• Decision on MTF• IT developments• Client categorization• Best execution principle• Outsourcing

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Tasks of the supervisors• Creating legislative background,

discussions• Guidelines and recommendations• Licensing• Information sharing with other

supervisors• List of market instruments• List of liquid shares• List of systematic internalizers

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Conclusions

Preparation is time-consumingClose co-operation between

supervisors and market participants

Long list of practical questionsCommon principles in other

financial sectors