MiFID
Following the adoption of the Financial Services Action Plan (FSAP), at Community level there has been a structural reorganization of the European financial market in the last few years with the aim of creating a truly integrated and competitive market.
The ultimate objective of the Action Plan is to establish uniform European rules so as to create a level playing field for all the different parties interested in operating on the market. This, in fact, is a necessary condition to ensure balanced and sustainable growth of the European exchange industry.
Among the directives issued under the Action Plan the one which is undoubtedly the most important and likely to have a major impact on financial markets and their participants is Directive 2004/39/EC, known as the Market in Financial Instruments Directive (MiFID). Approved by the European Parliament and the Council on 20 April 2004, it repealed Directive 93/22/EC, known as the Investment Services Directive (ISD).
The transposition of MiFID into national law was originally intended to be completed by April 2006, but this deadline was subsequently extended in view of the directive’s substantial impact on member states’ legislation. More specifically, the transposition must now be completed by 30 September 2007 and market participants must comply with the new provisions as of 1 November 2007.
MiFID’s main objectives include creating a competitive and harmonized financial environment for regulated markets and investment firms and strengthening investor protection and the efficiency and integrity of financial markets.
In fact MiFID introduces innovations both for intermediaries and for markets.
The main provisions affecting intermediaries concern:
- organizational requirements and the outsourcing of operational functions;
- conflicts of interest and the policies for managing them;
- investment research;
- the rules on incentives and the information provided to clients;
- the recording of orders and transactions;
- the information provided to clients and potential clients;
- the classification of clients into retail, professional and eligible counterparties;
- assessments of the appropriateness of the investment services provided to clients;
- client order handling rules;
- investment advisory services;
- best execution rules aimed at ensuring the best execution of clients’ orders;
- the new categories of investment services.
By contrast, the main provisions affecting markets concern:
- the elimination of the "concentration rule";
- the classification of trading venues into regulated markets, multilateral trading facilities (MTFs) and systematic internalizers;
- the rules on pre and post-trade transparency of market information;
- the provisions for the admission of financial instruments to regulated markets;
- the rules for the admission of intermediaries to regulated markets and MTFs;
- the rules on transaction reporting;
- the rules on clearing and settlement systems.