MiFID, referred to as “The Markets” in the Financial Instruments Directive, is one of most stringent of accords that has been getting of press comment that alters the financial services regulation in the UK. It details a set of stringent norms and reporting on how firms operate their businesses and the way they interact with their customers. The most affected firms are investment-banking companies, Asset Management firms and others involved in trading where implementation is a major challenge. Much of the news of MiFID implementations have been sensationalized with the potential impact of MiFID, dire warnings of huge spending on technology and struggles with the burden of the huge quantum of data generated.

The Investment Services Directive (ISD) has been the most significant European Union legislation for investment intermediaries and financial markets has been replaced by MiFID, extending the coverage of the current ISD regime and introducing new and more extensive requirements to which firms will have to adapt, in particular in relation to their conduct of business and internal organization. MiFID is a major part of the European Union’s Financial Services Action Plan (FSAP), which is designed to create a single market in financial services. In general, MiFID will cover most of the firms currently subject to ISD, plus some that currently are not. This will include:

  • Investment banks
  • Portfolio managers
  • Stockbrokers and broker dealers
  • Corporate finance firms
  • Many futures and options firms and
  • Many commodities trading firms

It sets out detailed requirements governing the conduct of business by investment firms and how regulated markets and MTFs operate. It also includes new pre-and post-trade transparency requirements for equity markets; the creation of a new regime for ‘systematic internalisers’ of retail order flow in liquid equities and more extensive transaction reporting requirements. This ensures that European retail customers will have access to a wider range of cost effective services and financial products. This helps firms gain access to markets in other member states within a common framework and carry out cross border business effectively and on a level competitive playing field. Adhering to legislation reduces the cost of doing cross border financial services business within Europe and improves accessibility to capital and enhances allocation of capital across the EU