MiFID Muddle

To most readers here I think I’m right in saying that the Markets in Financial Instruments Directive won’t mean much. It’s some new Europe-wide legislation designed to help regulate financial transactions.

Stop yawning. Please. Come back! This isn’t going to be completely dry and boring, honest.

So, anyway, one of its major elements is a concept called “best execution.” This isn’t a choice between a firing squad or a noose. The idea is that a trader has to be able to prove that they made the best deal, with the right people, at the best price. (On a serious note, I think this is a sensible idea, I’m just not convinced that regulation is the right way to achieve it.)

Unfortunately, speaking as an English man, I think we’re are at a disadvantage here. The Germans are efficient, so it shouldn’t be a problem in Frankfurt. The French probably don’t care what everyone else is doing, so I’m sure Paris will be fine. And the Italians are normally very outgoing and gregarious anyway. They probably speak to every trader at every bank just because they can. No, Milan will be fine.

But “best” could be a problem in London. Here our stiff upper lips and world-renouned reserve might prevent us from saying that we’re the best at anything. We should really be aiming for “pretty decent execution,” with a “quite good” counterpart at a “not too shabby” price. Although, to some, that still might be considered gushing.

It’s important that laws that affect multiple countries are made in a culturally sensitive manner and, as I think I’ve made clear, this is not the case with MiFID.