The EU's revised Markets in Financial Instruments Directive (MiFID) and Markets in Financial Instruments Regulation (together MiFID II) is live since 3 January 2018.
What is MiFID II?
In order to remedy deficiencies highlighted by the 2008 financial crisis and to take into account the evolution of financial markets, European authorities have started since 2011 the review of the existing MiFID provisions. As a consequence, new pieces of legislation were adopted in May 2014 with the aim to improve financial markets' transparence and resilience, and to strengthen customers' protection.
Key aspects of MiFID II are:
- Strengthened pre- and post-trade transparency requirements for shares and similar financial instruments, as well as for "non-equity" financial instruments such as derivatives and bonds. Investment firms who have adopted the status of Systematic Internaliser will provide transparency, under certain conditions, on financial instruments which are admitted to trading on a trading venue (RM, MTF or OTF).
- Derivatives subject to clearing obligations that are deemed liquid by ESMA will have to be traded on platform.
- Reporting of transactions to the regulators will be strengthened. Its scope will be broader and the number of data fields to report will increase.
- New financial product governance obligations, which define the responsibilities of the product manufacturers and distributors.
- Investment firms will have to communicate more information to their clients.
- The strengthening of existing requirements related to remunerations and inducements. In this regard, the possibility for investment firms to pay/provide or being paid/provided monetary or non-monetary benefits to/from a third-party will be subject to stricter conditions.