The Markets in Financial Instruments Directive II (MiFID II) is a European Union (EU) directive that seeks to create a more transparent and efficient financial market across the EU. It is a comprehensive package of reforms to the existing Markets in Financial Instruments Directive (MiFID), which had been in place since 2007. MiFID II is scheduled to be implemented in January 2018 and is intended to improve investor protection and promote market integrity by increasing transparency and accuracy in the pricing of financial products.
The overall goal of MiFID II is to strengthen investor protection, reduce market abuse, and promote stability and fairness in the European financial markets. It will impact a range of financial instruments, including bonds, derivatives, and securities. MiFID II seeks to improve the quality of financial services for consumers by increasing transparency and accuracy.
To achieve its goals, MiFID II will implement a range of measures. It will require firms to provide more detailed information on the fees and costs associated with their services, including commissions, spread fees, and other fees. MiFID II also requires firms to provide investors with better pre- and post-trade transparency on prices and transactions. The directive also seeks to reduce the potential for market manipulation by introducing a new trading obligation for certain types of derivatives.
In addition, MiFID II will introduce new rules to ensure that firms offering investment advice and investment services are doing so in an appropriate manner. This includes a requirement for firms to conduct a “suitability assessment” when providing advice, to ensure that the advice is suitable for the individual investor. MiFID II also tightens the rules surrounding the trading of derivative contracts, and requires firms to disclose more information on their trading activities.
MiFID II also seeks to make the European financial markets more competitive by introducing new rules on the pricing of financial instruments. This includes the introduction of an “investment fee cap” which limits the amount of fees and costs that firms can charge for certain investment products. The directive also seeks to increase the number of firms offering investment services, by introducing a new “passporting” system which enables firms to offer their services across the EU.
Overall, MiFID II is a far-reaching package of reforms that seeks to improve the quality of financial services in the European markets. It will increase the transparency and accuracy of pricing and transactions, reduce the potential for market manipulation, and introduce new rules to ensure that firms offering investment advice and services are doing so in an appropriate manner. The directive also seeks to make the European financial markets more competitive by introducing new rules on pricing and increasing the number of firms offering investment services. It is scheduled to come into effect in January 2018, and will have a significant impact on the way investment firms operate.
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