The Markets in Financial Instruments Directive (MiFID) is a key piece of EU financial services legislation, intended to create a level playing-field for firms to compete in the EU’s financial markets and to ensure a consistent level of consumer protection across the EU. In October 2011, the European Commission adopted a legislative proposal for the revision of MiFID, which focused on investor protection and the stability of the EU financial system and considered market structural developments and new methods of trading, such as dark pool trading of equities and high frequency trading. The proposals took the form of a revised directive (the MiFID II Directive) and a new Level 1 text, the Markets in Financial Instruments Regulation (MiFIR).
In 2014, the MiFID II Directive and MiFIR were published in the Official Journal of the EU. Together with related delegated acts and guidance, the legislative package as a whole is commonly referred to as “MiFID II”. The majority of the MiFID II requirements became effective from 3 January 2018.
In 2020, as part of the EU’s post-COVID-19 capital markets recovery package, the European Commission published a set of “Quick Fix” proposals to amend MiFID II. Much of what was included had been considered by ESMA and European Commission in the past, as part of the broader MiFID II review.
The MiFID Quick Fix was published in the Official Journal of the EU on 1 March 2021. Amendments were made to information requirements and in the field of commodities markets and included:
- Suspension of RTS best execution reports until 28 February 2023
- Alleviation of ex-post reporting requirements for ECPs and professional clients
- Limitation of the scope of the position limit regime to only apply to agricultural commodity derivatives and commodity derivatives designated as critical or significant
- Removal of securitised derivatives from the position limit regime and reporting requirements.
In November 2021, the European Commission published a proposal to review MiFIR and MiFID II, as part of its Capital Markets Union legislative package. Proposals focused on the design of a consolidated tape; the cost and quality of market data; improvements to the systematic internaliser regime; the scope of the share trading obligation; the double volume cap mechanism; the definition of a multilateral trading system; application of the derivatives clearing and trading obligations; non-discriminatory clearing access for exchange-traded derivatives; and a ban on offering payment for order flow.
AIMA broadly supports the review proposal and is engaging with the European Parliament and Council of the EU on amendments to the MiFIR and MiFID texts. Our detailed position on the proposal can be found here.
The average length of the legislative procedure is around 18 months. Following this, the MiFIR and MiFID II amendments will enter into force and apply 20 days after publication in the Official Journal of the EU.
In July 2021, HM Treasury launched a broad consultation to determine how the UK’s approach to regulating secondary markets should be adapted post-Brexit. Proposals ranged from the operation of the systematic internaliser regime and commodities position limits framework to the establishment of a consolidated tape.
Overall, AIMA is supportive of the proposals. Our response to the consultation can be found here.
In March 2022, HM Treasury provided feedback on its consultation. It stated that a large proportion of the proposals were supported by the industry and will be taken forward, including removing the double volume cap mechanism and repealing the share trading obligation. An overview of HM Treasury’s feedback can be found here.
As part of the UK Wholesale Markets Review, the Financial Conduct Authority will launch consultations on changes to FCA rules and guidance. Initial consultations will focus on equity and non-equities trade reporting; systematic internaliser reporting; and trading venues.