In 2007, the European Commission implemented the Markets in Financial Instruments Directive (MiFID) in an attempt to integrate the European Union’s financial markets and to increase the amount of cross border investment orders.
In late 2009, after the Financial Crisis, European officials agreed to a process to review and amend MiFID, known as MiFID II, as part of their comprehensive overhaul of the EU financial regulatory regime (similar to Dodd-Frank), and in October 2011, released a draft legislative proposal. At its core MiFID II addresses issues related to pre- and post-trade transparency requirements, as well as issues relating to technical advances in the markets, such as high-frequency trading (HFT) and algorithmic trading. MiFID II was also released with an accompanying regulation (MiFIR).
MiFID II amends specific requirements regarding, among other topics, high frequency trading, position limits and reporting, powers available to competent authorities, organizational requirements for trading venues, data reporting and rules applicable to third-country firms.
MiFIR introduces provisions among other topics, on transparency for trading venues, transparency for investment firms trading OTC including systematic internalizers, transaction reporting, derivatives, non-discriminatory clearing access for financial instruments, provision of services without a branch by third country firms.
On January 14, 2014, after almost 3 years of consultations and negotiations policy makers from the Council of the EU, European Commission, and European Parliament reached a tentative agreement on the major political issues in the MiFID II/MiFIR dossiers. In the Spring, the European Parliament and the Council of the EU approved the dossiers in their respective institutions. The European Securities and Markets Authority (ESMA), as well as EU Member State Competent Authorities, have begun the Level 2 implementation process, which is expected to continue into 2015.
The revision of MiFID was driven by a number of policy issues, including:
Some key areas for MFA include:
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