To help understand what changes MiFID II is likely to have on the financial market, Bridging & Commercial has produced a guide as to what to expect.

What is MiFID?

MiFID, otherwise known as the Markets in Financial Instruments Directive, is the European Union legislation that regulates firms that provide services to clients linked to financial instruments.

These instruments include shares, bonds, units in collective investment schemes and derivatives. 

MiFID was applied in the UK from November 2007, but is now being revised to improve the functioning of financial markets in light of the financial crisis and to strengthen investor protection.

What changes will we see in MiFID II?

MiFID II is aiming to enhance the efficiency, resilience and integrity of the financial markets. 

It hopes to achieve greater transparency with the introduction of a pre- and post-trade transparency regime for non-equities, as well as strengthening and broadening the existing equities trade transparency regime.

It is also looking to bring more trading on to regulated venues. 

Additionally, it will strive to facilitate access to capital for SMEs through the introduction of the SME Growth Market label.

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Improved protection for investors is also a main priority with the enhancement of the rules on inducements, a ban on inducements for independent advice and new product governance rules. 

Finally, MiFID II hopes to level the playing field in financial markets and to enable them to work for the benefit of the economy, supporting jobs and growth. 

Who should be concerned by MiFID II? 

MiFID II is expected to impact a wide range of financial businesses. 

The Financial Conduct Authority (FCA) said these range from firms it authorises and recognises, as well as unregulated entities trading commodity derivatives.

These include: 

•    banks
•    investment firms
•    interdealer brokers
•    stockbrokers
•    investment advisers
•    corporate finance firms and venture capital firms
•    investment managers, including individual and collective portfolio managers
•    financial advisers
•    local authorities

The FCA has said that firms should start planning for the MiFID II changes ahead of the finalisation of the EU implementing legislation and the subsequent changes that it and the Prudential Regulation Authority will be making to their handbooks, as well as the changes made by HM Treasury.

Has MiFID II been approved? 

The FCA is currently consulting on its third set of implementation proposals for MiFID II and seeking views on its proposed changes to its handbook.

Those impacted by the changes have until 4th January 2017 to send over any comments.

The FCA will then consider the feedback and publish its rules in a policy statement in the first half of 2017.

MiFID II will then take effect on 3rd January 2018.

To provide feedback to the FCA email [email protected] or visit its website.