ESMA Regulation - MiFID II/MiFIR

From MarketsReformWiki
(Redirected from MiFID II)
Jump to: navigation, search
Timeline, MiFID II
MiFID Effective MiFID II/MiFIR Proposal Entered into Force Rules Applicable
November 1, 2007 October 20, 2011 July 2, 2014 January 2017

The Markets in Financial Instruments Directive (MiFID) is a plan, created in 2004 and effective in 2007, to introduce changes to the regulatory framework in Europe.[1] Among its provisions were pre-and post-trade transparency through multi-lateral trading facilities and greater regulatory capital requirements. For more information on the original directive, click HERE.

On May 15, 2014, the European Parliament issued its recast directive on markets in financial instruments (MiFID II), as well as the the Markets in Financial Instruments Regulation (MiFIR). The documents entered the Official Journal of the European Union on June 12, 2014 and entered into force July 2, 2014.

Background

On October 20, 2011, the European Commission released the final proposal for an updated version of MiFID, commonly referred to as "MiFID II." Among the provisions of MiFID II, are:

  • The addition of previously-unregulated organized trading facilities (OTFs) to the MiFID framework. The original MiFID only covered multi-lateral trading facilities;
  • New safeguards for algorithmic and high-frequency trading activity;
  • Additional and reinforced powers of supervision of derivatives markets, coordinated with the European Securities and Markets Authority (ESMA); and
  • Stricter requirements for portfolio management, investment advice and other investor protections.[2]

Also released on October 20, 2011 was an impact assessment of MiFID II, which explained the shortcomings of the first MiFID directive. The study identified seven problem areas:

  • Lack of level playing field between markets and market participants, in light of industry changes including the rise of high-frequency trading and over-the-counter (OTC) derivatives;
  • Difficulties for Small and Medium Enterprises (SMEs) to access financial markets
  • Lack of transparency for market participants, given the increased use of dark pools;
  • Lack of transparency for regulators and insufficient supervisory powers in key areas;
  • Insufficient investor protection in such areas as mis-selling to clients and trade execution quality;
  • Weaknesses in some areas of the organization, processes, risk controls and assessment of market participants; and
  • Obstacles to competition in clearing infrastructures.


The 65-page document, which is embedded below, aims to ensure financial stability in the European Union member states by improving accountability and transparency in the financial system. This legislation builds on the earlier MIFID passed in 2007, and will overhaul the European market regulation. The entirety of the legislation will take effect by 2017, with the first rules to be implemented in 2015.

High Frequency Trading and Algorithmic Trading Impacts

MiFID II will affect high frequency trading and algorithmic trading firms (HFT) in a number of ways. The directive will also create a definition for High Frequency Trading (HFT). Additionally it will require all firms meeting HFT definition will have to be authorized under the directive. To learn more on its impact on high frequency trading, Click Here.

Corporate Governance & Remuneration

Along with the Basel III implantation in the EU, CRD IV, a rash of new changes impact the governance structure and remuneration policy requirements in EU jurisdictions from the directive. For more information Click Here

Transparency & Reporting Requirements

Increased transparency is a keystone of the reforms being implemented in the European Union. MiFID II introduces new market transparency requirements, with both exchanges and market participants being impacted. Additionally new reporting requirements are created by the directive. For more information Click Here

Third Country Firms & Passporting

Non-EU firms operating in the EU will be affected by the directive and passporting between member states will be allowed under the new regulations. Additionally, To learn more Click Here

Videos

Reg Roadmap: European Regulation Winding Its Way Forward

The European regulatory overhaul has been long and winding as industry participants grapple with three major initiatives simultaneously: EMIR, MIFID II and Basel 3, just to name a few


Speed Reader: FIA Europe’s Simon Puleston Jones making his way through MiFID II


EU regulation continues to wind its way through the system. That’s keeping Simon Puleston Jones a busy man.

As chief executive of FIA Europe, he’s busy making his way through the EU’s 845-page consultation document that contains 860-plus questions, as part of a 10-week consultation process that ends on August 1.

John Lothian News spoke with him about what’s in it and what it means for the industry.


Post-Trade Views: Euronext’s Andrew Simpson on Interoperability and Open Access

Financial regulators began their overhaul a few years ago with several goals in mind, one of which was to make clearing and trading venues more open and transparent. But can cash securities and derivatives be shoehorned into the same set of rules? Andrew Simpson, head of post-trade services at Euronext, compares the regulatory objectives with the realities of the market.

Related Documents: Mifid II, MiFIR as Appeared in the Official Journal of the European Union


References

  1. Markets in Financial Instruments Directive (MiFID). FSA. Retrieved on August 12, 2011.
  2. New rules for more efficient, resilient and transparent financial markets in Europe. European Commission. Retrieved on October 20, 2011.

External Links

MarketsReformWiki Sponsors

RSM US LLP ADM Investor Services Cinnober Fidessa