MiFID is a Financial Instruments Directive that governs markets. It has been in use in all European Union member states since November 2007. MiFID is a crucial EU regulation of the financial markets that seeks to improve the efficiency and competitiveness of the markets by creating harmonized investment services for all activities related to the financial markets. This guarantees all investors in financial instruments advanced and harmonised protection.
In 2011, the European Commission parliament agreed to a proposal of revising the MiFID policy. The proposal was in the form of a revised directive and a new regulation. In June 2014, the EU parliament adopted the proposal of repealing Directive 2004/39/EC and a further regulation on the markets in the Financial Instruments. The changes which were commonly referred to as MiFID II and MiFIR were officially published in the European Union official journal in 2014.
The MiFID Policy
The MiFID regulations before amendments set out five key issues as outlined below;
- Regulations requiring complete reporting to limit any form of market abuse;
- Authorization requirements for all regulated markets;
- A comprehensive code of conduct which outlines all business and organizational needs for investments;
- A set of rules governing the admission of financial instruments to trading.
Improved Functionality of the Markets
The new rules are an advancement of the existing ones, and they were carefully designed taking into account the nature of the trading environment. Since the implementation of the policy in 2007, several happenings had occurred including the financial crisis. The primary objective of the amendments was to improve the functioning and efficiency of the financial markets which makes them more transparent and resilient.
The EU is set to start implementing the new changes to the policy in January 2018.