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, the European Commission consulted on a review of the MiFID II regulatory framework. AIMA responded to the consultation and advocated for a targeted overhaul of a number of aspects of the regime, including:
- Market data costs - Strengthening the “reasonable commercial basis” framework in respect of data provision.
- Consolidated tape – AIMA members support the development of post-trade consolidated tapes for equities and non-equities markets, though oppose the possibility of mandatory consumption of CT data and the potential use of a European Best Bid and Offer reference price benchmark to gauge best execution.
- Investor disclosures: Exempting professional clients and eligible counterparties from ex ante cost information obligations.
- Best execution: Removing the reporting requirement, at the very least for firms providing the service of portfolio management exclusively to professional clients.
- Client classification: Changing the existing client classification framework to make it easier for firms to provide an appropriate range of services to high-net-worth individuals.
- Trade and transaction reporting: Reducing the volume of reporting and enhance overall efficiency by adjusting the parties that fulfil reporting obligations.
Also 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 – ESMA will submit a list defining “critical or significant” by 28 November 2021.
- Removal of securitised derivatives from the position limit regime and reporting requirements.
The wider review of MiFID II/MiFIR is currently underway with ESMA recently consulting on transaction and reference data obligations, algorithmic trading rules and the functioning of Organised Trading Facilities.
The UK is also due to make broader changes to the UK MiFID Delegated Regulation (2017/565/EU). In April 2021, the FCA published its first consultation with HM Treasury on Capital Markets reform, proposing amendments to areas of UK MiFID II conduct and organisational requirements.
(Last updated: 29 June 2021)