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Updated rules for markets in financial instruments: MiFID 2


Whats is MiFID?

MiFID is the Markets in Financial Instruments Directive (2004/39/EC). It has been applicable across the European Union since November 2007. It is a cornerstone of the EU’s regulation of financial markets seeking to improve the competitiveness of EU financial markets by creating a single market for investment services and activities and to ensure a high degree of harmonised protection for investors in financial instruments.


MiFID defines:

  • conduct of business and organisational requirements for investment firms;
  • authorisation requirements for regulated markets;
  • regulatory reporting to avoid market abuse;
  • trade transparency obligation for shares; and
  •  rules on the admission of financial instruments to trading.


On 20 October 2011, the European Commission adopted a legislative proposal for the revision of MiFID which took the form of a revised Directive and a new Regulation. After more than two years of vigorous debate, the Directive on Markets in Financial Instruments repealing Directive 2004/39/EC and the Regulation on Markets in Financial Instruments, commonly referred to as MiFID II and MiFIR, were adopted by the European Parliament on 15 April 2014, by the Council of the European Union on 13 May 2014 and published in the EU Official Journal on 12 June 2014.

Building on the rules already in place, these new rules are designed to take into account developments in the trading environment since the implementation of MiFID in 2007 and, in light of the financial crisis, to improve the functioning of financial markets making them more efficient, resilient and transparent.


Technical Standards

MiFID II and MiFIR empower ESMA to develop numerous draft regulatory technical standards (RTS) and draft implementing technical standards (ITS) and ESMA delivered three sets of technical standards

  • on 29 June 2015 (Final Report)
  • on 28 September 2015 (Final Report, Technical Standards and CBA)
  • on 11 December 2015

The rules contained in these draft technical standards, once implemented, will bring the majority of non-equity products into a robust regulatory regime and move a significant part of OTC trading onto regulated platforms. More specifically, the key rules introduce:

Fairer, safer and more efficient markets through:

  • tests to determine whether a non-financial firm’s speculative investment activities are so great that it should be subject to MiFID II;
  • ranges for the new EU-wide commodity derivatives position limits regime;
  • rules governing high-frequency-trading, imposing a strict set of organisational requirements on investment firms and trading venues;
  • provisions regulating the non-discriminatory access to central counterparties (CCPs), trading venues and benchmarks, designed to increase competition;
  • provisions requiring trading venues to offer disaggregated data on a reasonable commercial basis.

Greater transparency through use of :

  • thresholds for the pre-trade and post-trade transparency regimes extended to equity-like instruments, bonds, derivatives, structured finance products and emission allowances;
  • a newly-introduced liquidity assessment for non-equity instruments;
  • a newly-introduced trading obligation for shares and certain derivatives to be traded only on regulated platforms and, in the case of shares, systematic internalisers, instead of over-the-counter;
  • a double volume cap mechanism to limit dark trading and reshape the use of waivers for shares and equity-like instruments;
  • newly-introduced reporting requirements for commodity derivatives.

Stronger investor protection by:

  • improved disclosure to strengthen the best execution regime.

ESMA now has to adopt, where necessary, Level 3 measures (Guidelines, Q&As, etc) to provide guidance to the different stakeholders and ensure consistent implementation across the Union.

Technical Advice

In addition, ESMA received a formal request from the European Commission on 23 April 2014 to provide technical advice to assist the European Commission on the possible content of the delegated acts required by several provisions of MiFID II/MiFIR. ESMA delivered its technical advice on 19 December 2014.

Monitoring, publications and reports

With the application of MiFID II/MiFIR (3 January 2018), ESMA will be responsible for many on-going duties including in particular the on-going publication of information on its website (e.g. reference data or volumes of trading executed under certain waivers for the purpose of the double volume cap mechanism), the production of reports in cooperation with the European Commission (e.g. on the functioning of OTF or SME growth markets) and the monitoring and publication of opinions of how certain provisions are implemented (e.g. implementation of position limits or use of pre-trade transparency waivers).


  • 3 January 2018
    • MiFID II and MiFIR apply within Member States
  • 3 July 2017
    • MiFID II transposed into national law of Members States
  • 3 January 2016
    • ESMA published and sent to the Commission its second set of Technical Standards (2015/1858)
  • 28 September 2015
    • ESMA published and sent to the Commission its second set of Technical Standards (2015/1464)
  • 31 August 2015
    • ESMA published a Consultation Paper on draft ITS (2015/1301)
  • 29 June 2015
    • ESMA published and sent to the Commission its first set of Technical Standards (2015/1006)
  • 19 December 2014
    • ESMA published its Technical Advice to the Commission (2014/1569) and a Consultation Paper on draft RTS/ITS (2014/1570). With respect to the latter, an addendum has been published on 18 February 2015
  • 12 June 2014
    • MiFID II/ MiFIR published in the Official Journal (MiFID II and MiFIR entered into force 20 days after publication in OJ – i.e. 2 July 2014)
  • 22 May 2014
    • ESMA published one Discussion Paper (2014/548) and one Consultation Paper (2014/549) to gather views respectively on draft RTS/ITS and Technical Advice to the European Commission

Source: ESMA Policy & Rules

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Antonio Caldas

Program/Project/Risk manager with 15+ years mix-industry, with a particular emphasis in Banking & Financial Services. Active in risk management, market risk control, front office risk management, product control, change and transformation management, business analysis and business process improvement for global capital markets and investment banking, covering a multiple range of asset classes.

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