MiFID (II) and MiFIR
MiFID (II) and MiFIR
MiFID is the Markets in Financial Instruments Directive (2004/39/EC). It has been applicable across the European Union since November 2007. It is a cornerstone of the EU's regulation of financial markets seeking to improve the competitiveness of EU financial markets by creating a single market for investment services and activities and to ensure a high degree of harmonised protection for investors in financial instruments.
MiFID sets out:
- conducts of business and organisational requirements for investment firms;
- authorisation requirements for regulated markets;
- regulatory reporting to avoid market abuse;
- trade transparency obligation for shares; and
- rules on the admission of financial instruments to trading.
MiFID II and MiFIR
On 20 October 2011, the European Commission adopted a legislative proposal for the revision of MiFID which took the form of a revised Directive and a new Regulation. After more than two years of vigorous debate, the Directive on Markets in Financial Instruments repealing Directive 2004/39/EC and the Regulation on Markets in Financial Instruments, commonly referred to as MiFID II and MiFIR, were adopted by the European Parliament and the Council of the European Union, and published in the EU Official Journal on 12 June 2014.
Building on the rules already in place, these new rules are designed to take into account developments in the trading environment since the implementation of MiFID in 2007 and, in light of the financial crisis, to improve the functioning of financial markets making them more efficient, resilient and transparent.
MiFID II/MiFIR had an initial application date of 3 January 2017. Due to implementation challenges, the European Commission in February 2016 made a proposal to delay the application of MiFIDII/MiFIR by one year. This amendment was adopted by the European Parliament and the Council on 23 June 2016, and MiFID II/MiFIR will start applying on 3 January 2018.
MiFID II and MiFIR empower ESMA to develop numerous draft regulatory technical standards (RTS) and draft implementing technical standards (ITS) and ESMA delivered three sets of technical standards
- on 29 June 2015 (Final Report)
- on 28 September 2015 (Final Report, Technical Standards and CBA)
- on 11 December 2015 (Final Report, Implementing Technical Standards and CBA)
The Commission adopted the technical standards in the course of 2016 and 2017.
The rules contained in these draft technical standards, will bring the majority of non-equity products into a robust regulatory regime and move a significant part of OTC trading onto regulated platforms. More specifically, the key rules introduce:
Fairer, safer and more efficient markets through:
- tests to determine whether a non-financial firm’s speculative investment activities are so great that it should be subject to MiFID II;
- ranges for the new EU-wide commodity derivatives position limits regime;
- rules governing high-frequency-trading, imposing a strict set of organisational requirements on investment firms and trading venues;
- provisions regulating the non-discriminatory access to central counterparties (CCPs), trading venues and benchmarks, designed to increase competition;
- provisions requiring trading venues to offer disaggregated data on a reasonable commercial basis.
Greater transparency through use of :
- thresholds for the pre-trade and post-trade transparency regimes extended to equity-like instruments, bonds, derivatives, structured finance products and emission allowances;
- a newly-introduced liquidity assessment for non-equity instruments;
- a newly-introduced trading obligation for shares and certain derivatives to be traded only on regulated platforms and, in the case of shares, systematic internalisers, instead of over-the-counter;
- a double volume cap mechanism to limit dark trading and reshape the use of waivers for shares and equity-like instruments;
- newly-introduced reporting requirements for commodity derivatives.
Stronger investor protection by:
- improved disclosure to strengthen the best execution regime.
ESMA is now in the process of adopting, where necessary, Level 3 measures (Guidelines, Q&As, opinions etc) to provide guidance to the different stakeholders and ensure consistent implementation across the Union.
In addition, ESMA received a formal request from the European Commission on 23 April 2014 to provide technical advice to assist the European Commission on the possible content of the delegated acts required by several provisions of MiFID II/MiFIR. ESMA delivered its technical advice on 19 December 2014.
Monitoring, publications and reports
With the application of MiFID II/MiFIR (3 January 2018), ESMA will be responsible for many on-going duties including:
- the on-going publication of information on its website (e.g. reference data or volumes of trading executed under certain waivers for the purpose of the double volume cap mechanism),
- the production of reports in cooperation with the European Commission (e.g. on the functioning of OTF or SME growth markets),
- the registers on trading venues, data reporting service providers and systematic internalisers, and
- the monitoring and publication of opinions of how certain provisions are implemented (e.g. implementation of position limits or use of pre-trade transparency waivers).
3 January 2018
MiFID II and MiFIR apply within Member States
30 November 2017
Transparency calculations, suspensions and restoration
31 July 2017
Transparency data collection, interface to support double volume cap
3 July 2017
MiFID II transposed into national law of Members States
30 June 2017
Publication of ESMA opinion on ancillary activity under MiFID II – market size calculation
- 19 June 2017
01 June 2017
Instrument refernce data collection, provisions to NCAs and publication
22 May 2017
ESMA opinion on traded on a trading venue under MiFIR
31 March 2017
ESMA published the final report and the final draft RTS specifying the scope of the consolidated tape for non-equity financial instruments
- 28 February 2017
30 June 2016
MiFID II/MiFIR amending regulation published by the Commission (2016/1033)
- 30 May 2016
- 2 May 2016
- 2 May 2016
3 January 2016
ESMA published and sent to the Commission its third set of Technical Standards (2015/1858)
28 September 2015
ESMA published and sent to the Commission its second set of Technical Standards (2015/1464)
31 August 2015
ESMA published a Consultation Paper on draft ITS (2015/1301)
29 June 2015
ESMA published and sent to the Commission its first set of Technical Standards (2015/1006)
- 19 December 2014
12 June 2014
MiFID II/ MiFIR published in the Official Journal (MiFID II and MiFIR entered into force 20 days after publication in OJ – i.e. 2 July 2014)
- 22 May 2014