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 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).
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 Level 1 text, among other things:
provides for net position limits and reporting of positions in commodity derivatives, the details of which are to be finalised at Level 2;
adopts a harmonised regime for third country firms providing services to professional clients and eligible counterparties in the EU;
introduces specific organisational requirements for algorithmic trading firms as well as more stringent requirements in respect of market making algorithms and measures specifically intended to deal with HFT participants, such as fee structures for excessive order cancellation and minimum tick sizes;
introduces a requirement for the ‘straight-through-processing’ (STP) of certain cleared derivative transactions;
provides for a new category of trading venue, the Organised Trading Facility (OTF), for non-equity instruments;
contains rules for the exchange trading of derivative contracts which meet certain requirements;
enhances pre- and post-trade transparency provisions for both equities and non-equities; and
Preparatory Level 2 work on implementing MiFIDII/MiFIR has been commenced by ESMA. We anticipate the publication of formal discussion and consultation papers during Q2 2014.
Given the level of work left to be completed, a long lead-in time is set by MiFIDII/MiFIR, with rules due to go live 30 months after the legislation is formally published in the Official Journal of the European Union. Rules are, therefore, likely to come into effect in late 2016 or early 2017.
Key legislative documents
Text of MiFID 1 (April 2004)
MiFID I Implementing Regulation (September 2006)
MiFID I Implementing Directive (September 2006)
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
Politically Agreed Text of MiFIDII (February 2014)
Politically Agreed Text of MiFIR (February 2014)
Consultations, legislative process and related AIMA documents
Key AIMA Documents
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)