Many in Europe’s financial industry have mixed feelings about the new regulations that will take effect on November 1, 2007. The Markets in Financial Instruments Directive (MiFID) will inject Anglo-Saxon standards of transparency and disclosure into European investment advisory services and securities trading. It will force firms to change fundamentally the way they conduct business.

By reducing the regulatory differences among the European Union’s 27 national markets, the new regime should—in the long run—cut costs, increase efficiency, and stimulate growth. MiFID will also tilt the balance in the marketplace in favor of customers.

In the short run, however, bankers and asset managers will be forced to work harder, perhaps for smaller profits. Even by EU standards, MiFID is complex, affecting virtually every aspect of an investment firm’s business. According to several recent surveys, more than half of the affected companies will not be ready by the November 1 deadline. Our experience with clients bears this out. Those that adapt to the new rules quickly will therefore have a chance to establish a “first-mover advantage.” Those that fail to do so will find themselves punished, if not by regulators then by market forces.

MiFID’s impact will be most pronounced on the...