EU rules on investment services

The EU has established a comprehensive set of rules on investment services and activities with the aim to promote financial markets that are

  • fair
  • transparent
  • efficient
  • integrated

The first set of rules adopted by the EU helped to increase the competitiveness of financial markets by creating a single market for investment services and activities. They also ensured a high degree of harmonised protection for investors in financial instruments, such as shares, bonds or derivatives.

However, after the 2008 financial crisis it became clear that a more robust regulatory framework was needed to

  • further strengthen investor protection
  • address the development of new trading platforms and activities

Markets in financial instruments directive - MiFID

MiFID is the markets in financial instruments directive (Directive 2004/39/EC). In force since November 2007, it is a cornerstone of the EU's regulation of financial markets. It governs

  • provision of investment services in financial instruments by banks and investment firms
  • operation of traditional stock exchanges and alternative trading venues

While MiFID created competition between these services and brought more choice and lower prices for investors, shortcomings were exposed in the wake of the financial crisis.

MiFID 2 and MiFIR

In June 2014, the European Commission adopted new rules revising the MiFID framework. These consist of a directive (MiFID 2) and a regulation (MiFIR).

MiFID 2 aims to reinforce the current European rules on securities markets by

  • ensuring that organised trading takes place on regulated platforms
  • introducing rules on algorithmic and high frequency trading
  • improving the transparency and oversight of financial markets – including derivatives markets - and addressing some shortcomings in commodity derivatives markets
  • enhancing investor protection and improving conduct of business rules as well as conditions for competition in the trading and clearing of financial instruments

Building on the rules already in place, the revised MiFID rules also strengthen the protection of investors by introducing requirements on the organisation and conduct of actors in these markets .

MiFIR sets out requirements on

  • disclosure of data on trading activity to the public
  • disclosure of transaction data to regulators and supervisors
  • mandatory trading of derivatives on organised venues
  • removal of barriers between trading venues and providers of clearing services to ensure more competition
  • specific supervisory actions regarding financial instruments and positions in derivatives

The application date of MiFID II and MiFIR, initially scheduled for 3 January 2017, has been extended to 3 January 2018.

Documents

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