AIMA

The Alternative Investment Management Association

Alternative Investment Management Association Representing the global hedge fund industry

MiFID / MiFIR

The first Markets in Financial Instruments Directive (MIFID) came into force on 1 November 2007, replacing and expanding upon the Investment Services Directive. MiFID’s objective was to increase the integration and efficiency of EU financial markets by establishing a harmonised regulatory framework for the provision of investment services in financial instruments across the EU and for the operation of regulated markets by market operators.

Following the global financial crisis, the European Commission (Commission) decided to review the MiFID framework and on 20 October 2011 published proposals for (i) a revised Directive (MiFIDII) and (ii) a new Regulation (MiFIR).

Level 1 Texts

The European Parliament voted on its amendments to the Commission’s proposals on 26 October 2012 and the Council reached a General Approach in June 2013. Trialogues between all three EU legislative institutions then commenced, with a political agreement for the Level 1 MiFIDII/MiFIR texts being reached on 14 January 2014. The politically agreed Level 1 texts were formally adopted by the European Parliament on 15 April 2014 and the Council on 13 May 2014.

The Level 1 text amends the MiFID I regime by, among other things:

  • providing for net position limits and reporting of positions in commodity derivatives, the details of which are to be finalised at Level 2;
  • adopting a harmonised regime for the provision of services by third-country investment firms to per se professional clients and eligible counterparties within the EU;
  • introducing specific systems and controls requirements for algorithmic trading firms and trading venues, in particular those investment firms running market making algorithms;
  • developing market stability measures to deal with the increase in HFT participants, for example by removing the own account trading exemption for HFT strategies and enabling venues to create fee structures for excessive order cancellation and systems use, as well as specific requirements for minimum tick sizes;
  • implementing a requirement for the ‘straight-through-processing’ (STP) of cleared derivative transactions from trade to clearing house as quickly as possible;
  • introducing a new category of trading venue for non-equity instruments, the Organised Trading Facility (OTF);
  • contains rules for the exchange trading of derivative contracts which meet certain requirements;
  • enhancing pre- and post-trade transparency and transaction reporting provisions for equities and introducing such transparency for non-equities; and
  • requiring non-discriminatory access between trading venues and clearing houses, and vice versa.

MiFIDII and MiFIR were published in the Official Journal of the European Union on 12 June 2014. A large amount of implementation work is left to be completed, thus the rules of MiFIDII/R will not enter into effect for 30 months after publication.

Level 2 Texts

The Level 1 texts of MiFIDII/R provide the main requirements and obligations to be placed upon in-scope entities. However, key technical details on the precise meaning and implementation of these requirements have yet to be provided. The European Securities and Markets Authority (ESMA) are required to provide over 100 pieces of technical advice to the Commission on potential delegated acts,  draft regulatory technical standards (RTS) and draft implementing technical standards (ITS). These non-essential technical details and implementing measures form what is known as the 'Level 2' phase of MiFIDII/R.

ESMA launched its Level 2 consultation process on 22 May 2014 with the publication of a:

  • Consultation Paper on ESMA's technical advice on MiFIDII/R delegated acts that it must provide to the European Commission by December 2014; and,
  • Discussion Paper on draft RTS/ITS, the responses to which are intended to provide the basis for a further consultation paper to be issued in late 2014/early 2015.

AIMA submitted a response to both papers. We now await a final consultation on ESMA's draft RTS.

Once ESMA has submitted its advice and draft technical standards to the Commission, the Commission will then publish its final Level 2 delegated and implementing regulations for MiFIDII/R.

 


 

Key legislative documents

MiFID I
Level 1

Text of MiFID 1 (April 2004)

Level 2

MiFID I Implementing Regulation (September 2006)

MiFID I Implementing Directive (September 2006)

Level 3

ESMA Final Report and Guidelines on certain aspects of MiFID compliance function requirements (July 2012)

ESMA's Final Report - Guidelines on systems and controls in an automated trading environment for trading platforms, investment firms and competent authorities (April 2012)

CESR Guidelines on MiFID Transaction Reporting (May 2007)

MiFID II / MiFIR
Level 1

MiFIDII Level 1 Text (June 2014)

MiFIR Level 1 Text (June 2014)

 


 

Consultations, legislative process and related AIMA documents

Level 1

Level 2

 


 

Key AIMA Documents

AIMA's cover letter to its response to the ESMA MiFID II/MiFIDR Consultation and Discussion Papers (August 2014)

Reply form for the ESMA MiFID II/MiFIR Consultation Paper (August 2014) 

Reply form for the ESMA MiFID II/MiFIR Discussion Paper (August 2014)

AIMA Summary - potential MiFIDII/MiFIR Level 2 measures (July 2013)

AIMA Summary - MiFID/R: respective positions of the European Commission, Parliament and Council (July 2013)

AIMA position paper on MiFIDII/R (January 2012)

AIMA response to the Rapporteur's Questionnaire on MiFID 2 and MiFIR (January 2012)

AIMA response to the European Commission Public Consultation ‘Review of the Markets in Financial Instruments Directive (February 2011)

 


 

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  1. Asset Management Regulation
    1. EU Asset Management Regulation
      1. AIFMD
      2. European Capital Markets Regulation
      3. MiFID / MiFIR
      4. UCITS
      5. European Venture Capital Directive
      6. Shareholder Rights Directive
      7. European Long Term Investment Fund Regulation
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      10. AIFMD-Related Events
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      2. Incentive-Based Compensation
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      1. UK
      2. United States
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    7. Shadow Banking
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      7. CFTC Automated Trading
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