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Why MiFID II will make waves in the ETF market

Why MiFID II will make waves in the ETF market

MiFID II will provide a step change in the growth of ETFs, as investors look to diversify from both a performance and costs perspective.

That is according to the Irish Stock Exchange’s director of traded markets, development and operations, Brian Healy.

Speaking at a conference in London, Healy said MiFID II will also address key issues of commission payments to fund distributors, which should further incentivise the use of ETFs.

In his talk, Healy highlighted how overbearing the new regulation had become for many firms across Europe. 'Happy and MiFID II aren’t usually two words that are in the same phrase, as long as we don’t have to worry about a MiFID III.

'MiFID II will be a step change factor for the ETF market because Europe is still very nascent in ETFs in comparison to its US counterparts, who are somewhat the 'Big Daddy' in the space. There is definitely huge growth potential there.'

Detox on directives

Healy said he was surprised that there hadn’t been more commentary after MiFID II's implementation, but highlighted that investors needed a break from the regulation.

‘Maybe we all need a January detox, I’m not sure how many of you are doing dry January or going to the gym four more times that you used to, but maybe your New Year’s resolution should be to have a month off MiFID II.

‘In terms of the implementation it’s done, but we are now going to have to get used to living with it. The reality is that the whole MiFID II philosophy is going to be transformational.

'The new reporting system will open up ETFs and yes that will mean cost and yes it means implementation issues.'

However, Healy added that MiFID II could help the European ETF market close the gap between its US counterparts.

'We’ve heard about the data and we’ve heard about the drop holes on the regulatory front. But this is an opportunity to absolutely increase confidence, to spur growth and to close that gap with the US.

'Performance of European ETFs has been so strong and the opportunities are evident. There is still a big gap though, we are at the $800 billion mark, whereas the US is north of $3.2 trillion,' he added.

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