The MiFID (Markets in Financial Instruments Directive) was put in force in November 2007 and was created with the objective of harmonising Europe's financial landscape. This Directive changed how the financial markets worked and especially how they were ruled.
Time for information transparencyOver the years, the financial instruments were more open to new markets that were not necessarily regulated, enabling, therefore, the investor to choose on which platform s/he wanted to operate. One can easily understand that by opening to different European financial markets, the goal was to attract new investors.
This opening ended up creating opaque markets and transactions where the apparent lack of transparency harmed the investor.
MiFID created the rules on securities markets to regulate this situation and was reinforced in 2014 (MiFID II) with the main objective of enhancing financial stability by tackling the issues linked to market opacity.
Enlarging the scope of transparency requirementsA characteristic example is the transparency in costs that MiFID II regulates. According to the new directive, an investment firm must inform its clients about the total costs of the investment services and the financial instruments. The directive includes additional requirements and clarifies several existing requirements. The scope of transparency requirements extends to non-equity and equity-like instruments.
Expended Regulatory reportingThe reporting of transactions is also extended in a number of products and the number of data required for this transaction reporting has also significantly increased. This detailed reporting from the entities to the competent authorities aims to map in a better way the market and discourage any market abuse threats.
Detailed best execution to customersAnother important step to transparency is also the amendments on the "best execution" requirements for investment firms. The new Directive enhances the obligations for publicity of data regarding the details of execution like the cost, the quality etc. The investor has a full picture of all the "sufficient" steps that its investment firm takes.
MiFID II, in the scope of enhanced protection for the investors, has made the requirements for the entities and professionals of the sector more complex. The compliance has become very demanding, and the professionals require assistance in order to be in line with their obligations, understanding the new legal framework and training their employees. Please see our MiFID-MiFIR service page for more information.
Pideeco assists you in keeping your company in compliance with MiFID requirements and in implementing these rules with the most efficient way for your business.