Emerging & Specific Regulation


The Markets in Financial Instruments Directive (MiFID) II and the accompanying Markets in Financial Instruments Regulation (MiFIR) are pivotal regulatory frameworks governing investment services and activities in financial markets within the European Union. Their overarching goal is to improve the functioning of financial markets and enhance investor protection.

Overview of Topic

Here’s an overview of MiFID II and its main deliverables:

Increased Transparency: MiFID II significantly increases the transparency requirements for financial markets. It extends the scope of transparency to a broader range of asset classes and requires more detailed reporting of transactions and trading data to regulators and the public.

Market Structure Reforms: The regulation introduces changes to the structure of financial markets. It encourages trading of financial instruments on regulated platforms and limits the use of dark pools (private financial forums or exchanges for trading securities) to ensure more trading occurs in transparent environments.

Investor Protection: A key element of MiFID II is heightened investor protection. It includes stricter rules on product governance and suitability, ensuring that firms act in the best interests of their clients. There’s a particular focus on complex financial products to ensure that only suitable products are sold to each type of investor.

Commodity Derivatives: MiFID II introduces new regulations for commodity derivatives, including position limits to prevent market abuse and ensure fair and orderly trading. 

Record Keeping and Reporting: Firms are required to keep detailed records of all services, activities, and transactions to enable the competent authority to monitor compliance with MiFID II 

On 3 October 2023, the European Securities and Markets Authority’s (ESMA) guidelines on the MiFID II product governance requirements came into force.

The guidelines apply in relation to the manufacturing or distribution of financial instruments and structured deposits. In particular, the guidelines apply in relation to the following requirements:

Article 9(3) of MiFID II.

Article 16(3) and 16(6) of MiFID II.

Article 24(1) and 24(2) of MiFID II.

Articles 9 and 10 of Commission Delegated Directive (EU) 2017/5932 (MiFID II Delegated Directive).

Changes to MiFID II and MiFIR

Broadening Reporting Scope: Extending Article 26 requirements to Alternative Investment Fund Managers (AIFMs) and management companies executing financial instrument transactions.

Strengthening Obligations on National Competent Authorities (NCAs): NCAs to distribute reports to multiple authorities, including those responsible for supervising transmitting investment firms and trading venues.

Instruments in Scope: Expansion of scope to include certain off-venue OTC derivatives trades.

Transaction Identification Code (TvTIC): Inclusion in Level 1 legislation, requiring transaction reports to include a code generated by the trading venue.

Removal of Short Selling Flag: Alignment with UK supervisory priorities.

Branch Reporting and Pre-Trade Waiver Changes: Adjustment of text related to third country firm branch reporting and removal of the obligation to report applicable waivers.

Linking Requirement: Addition of requirements for linking specific transactions and identifying aggregated orders.requirements.

Research and Inducements: MiFID II introduces stricter rules on inducements, particularly concerning the payment for research and corporate access, to avoid conflicts of interest.

 Product Governance Requirements: Firms are required to have processes in place to ensure that financial products are designed to meet the needs of identified client groups and are distributed appropriately.

Data Reporting Services Providers (DRSPs): MiFID II introduces a new category of market participant, the DRSP, which includes consolidated tape providers, approved reporting mechanisms, and approved publication arrangements.


 Third-Country Firms: The regulation sets out conditions under which third-country firms (non-EU firms) may offer investment services or activities to EU clients.


 Harmonization Across the EU: MiFID II seeks to harmonize regulatory standards across the EU member states, aiming for a level playing field and increased competition across EU financial markets.


 Sustainability-Related Disclosures: More recent updates include requirements for sustainability-related disclosures, integrating considerations for environmental, social, and governance (ESG) factors in investment decisions and advisory processes.


 MiFID II represents a significant shift towards more robust regulatory oversight, transparency, and investor protection in the EU’s financial markets. It impacts a wide range of market participants, including investment firms, trading venues, and data reporting service providers.


 The Markets in Financial Instruments Regulation (MiFIR) complements the Markets in Financial Instruments Directive (MiFID) II and is a key component of the EU’s regulatory framework for financial markets. While MiFID II is a directive that requires member states to incorporate its provisions into their national laws, MiFIR is a regulation that applies directly across the EU without the need for domestic transposition. Here are the main aspects of MiFIR:


 Trade Transparency: MiFIR enhances the transparency requirements for equity and non-equity markets. It mandates real-time, public disclosure of trade data on trading venues and for off-venue trades.


 Transaction Reporting: One of the central features of MiFIR is the obligation for firms to report detailed information about all trades in financial instruments to their national competent authority. This reporting is more extensive than under MiFID and includes additional data elements.


 Access to Trading Venues and Central Counterparties (CCPs): MiFIR aims to promote competition and reduce costs by requiring trading venues and CCPs to provide non-discriminatory access to each other. This includes provisions for access to benchmarks used in trading and clearing of financial instruments.


 Mandatory Trading on Regulated Venues: MiFIR requires certain derivatives to be traded on regulated markets, multilateral trading facilities (MTFs), organized trading facilities (OTFs), or equivalent third-country venues. This is to increase transparency and oversight in the derivatives market.


 Product Intervention Powers: MiFIR gives powers to the European Securities and Markets Authority (ESMA) and national regulators to temporarily prohibit or restrict the marketing, distribution, or sale of certain financial instruments or financial activities if there is a significant investor protection concern or threat to the orderliness of markets or financial stability.


 Position Management in Commodity Derivatives: MiFIR allows regulators to manage the size of a position someone can have in commodity derivatives, helping to prevent market abuse and support orderly pricing and settlement conditions.


 Third-Country Firms Access: MiFIR sets out the conditions under which investment firms from third countries (non-EU countries) can provide services in the EU. This includes a requirement for an equivalence decision by the European Commission and registration with ESMA.


 Non-discriminatory Access to Market Data: MiFIR requires that data on trading activity and trade execution be consolidated and made available to the public in a non-discriminatory manner. This aims to improve market transparency and reduce information asymmetries among market participants.


 MiFIR plays a crucial role in achieving the objectives of increased transparency, improved investor protection, reduced systemic risk, and the promotion of competition in the EU financial markets. Its provisions are closely intertwined with those of MiFID II, and together they form a comprehensive regulatory framework for EU financial markets.

Significance in Today's Landscape

Compliance with the latest changes in MiFID (Markets in Financial Instruments Directive) is essential for various reasons:

Regulatory Requirement: MiFID is a fundamental regulatory framework governing financial markets in the European Union. Staying compliant with the latest changes is mandatory for financial institutions operating within the EU. Non-compliance can lead to regulatory sanctions and legal repercussions.

Investor Protection: MiFID aims to enhance investor protection by ensuring that financial products and services are suitable for clients. The latest changes often include provisions to strengthen investor rights, such as improved disclosure requirements and enhanced product suitability assessments.

Market Transparency: MiFID promotes market transparency by requiring the reporting of transactions and the publication of pre- and post-trade data. Staying compliant with these reporting obligations contributes to market integrity and helps regulators monitor market activity effectively.

Level Playing Field: MiFID ensures a level playing field for market participants by regulating trading venues and establishing common rules for market access and trading. Compliance with these rules helps maintain fair and orderly markets.

Best Execution: The latest changes in MiFID often include updates to the best execution requirements. Financial institutions must ensure they consistently achieve the best possible outcome for their clients when executing orders, which is essential for maintaining trust and integrity in financial markets.

Cross-Border Operations: MiFID has extraterritorial implications, impacting non-EU firms providing services to EU clients. Staying compliant with the latest changes is crucial for non-EU entities to continue offering their services to EU clients without regulatory issues.

Regulatory Oversight: Compliance with MiFID ensures that financial institutions are subject to regulatory oversight and supervision by relevant authorities. Adhering to the latest changes helps institutions meet regulatory expectations and standards.

Business Continuity: Some changes in MiFID may address business continuity and disaster recovery requirements. Ensuring compliance with these provisions is vital for maintaining operational resilience in the face of disruptions.


MiFID II applies directly to U.K. and EU-regulated investment firms. The EU MiFID II regime was onshored in the UK post-Brexit, with some adjustments to make the regime operate properly from a UK-only perspective.

Asset Managers
Commodity House

How Can We Help?


Gap Analysis and Compliance Assessment Identify Compliance Gaps

Review current practices against MiFID II/MiFIR requirements to identify areas of non-compliance


Risk Assessment

Assess the risks associated with non-compliance and prioritize actions based on their impact


Regulatory Strategy Development Compliance Roadmap

Develop a strategic plan outlining steps to achieve and maintain compliance.


Policy and Procedure Development

Assist in creating or revising policies and procedures to align with regulatory requirements


Implementation Support Operational Changes

Guide the implementation of required operational changes, such as new reporting systems or client onboarding processes


Technology Solutions

Advise on and assist in implementing technology solutions that facilitate compliance, like trading platforms or reporting tools.


Training and Education Staff Training:

Conduct training sessions for employees to understand the regulations and their roles in ensuring compliance.


Ongoing Education

Provide updates on regulatory changes and continuing education opportunities.


Reporting and Recordkeeping Assistance Transaction Reporting

Help set up systems and processes for accurate and timely transaction reporting.


Recordkeeping Solutions

Assist in establishing or improving recordkeeping practices to meet the stringent requirements of MiFID II/MiFIR


Product Governance and Client Classification Product Review

Assist in reviewing financial products to ensure they meet MiFID II’s product governance requirements.


Client Categorization

Guide firms in categorizing clients correctly according to MiFID II classifications.


Best Execution Analysis Execution Policies

Help in developing and reviewing best execution policies and procedures.


Execution Quality Analysis

Conduct analyses to ensure the best possible result for clients in executing orders


Market Structure Consultation Advice on Market Changes

Provide insights into how changes in market structure under MiFID II/MiFIR affect the firm’s operations.

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