The proposals to revise the MiFID regime, which were originally introduced in October 2011 and reached Trialogue agreement on 15 January 2014, have been approved by the Permanent Committee of Representatives (COREPER) on 19 February 2014.
There had been growing evidence to suggest that MiFID’s key principles – a regulatory framework centred on shares and regulated markets – needed updating to take into account a more complex market characterised by increasingly diverse financial instruments and methods of trading.
Thus, the proposals intend to tackle these updates first by way of a draft Regulation (MiFIR) (which will have direct effect) setting out requirements for:
- Disclosure of data on trading activity to the public and transaction data to regulators and supervisors
- Mandatory trading of derivatives on organised venues
- Removing barriers between trading venues and providers of clearing services to ensure more competition
- Specific supervisory actions regarding financial instruments and positions in derivatives
The second proposal is by way of draft Directive (MiFID II) (requiring national implementation measures) which:
- Amends existing provisions on authorisation and organisational requirements for providers of investment services, and all rules regarding investor protection, including for firms located in third countries but actively engaged in EU markets
- Sets out the requirements in relation to authorisation and organisational rules applicable to different types of trading venue, providers of market data and other reporting services, as well as the complete powers to be granted by Member States to national competent authorities, including the framework of sanctions for breaches of the rules
The new framework seeks to ensure that all organised trading is conducted on regulated trading venues such as regulated markets, multilateral trading facilities and organised trading facilities. It will also increase the supervisory powers of regulators. The EU, in revising MiFID, will also meet commitments made at the G20 summit at Pittsburgh in September 2009 to tackle less regulated and more opaque parts of the financial system.
On 25 February, ESMA published a speech by Ms Verena Ross, Executive Director at ESMA, on new financial market regulation. Ms Voss described the implementation of MiFID II as “the most significant project for ESMA this year” and in relation to which ESMA is required to develop approximately 100 technical standards or advice.
The proposals now have to be approved by the European Parliament to enable the Council to adopt them once the texts have been finalised in all languages. The Parliament is expected to consider the MiFID II legislative proposals at its 15 April 2014 plenary session with the MiFID II Directive and MiFIR expected to come into force in late 2016 to early 2017.
Contributed by Stuart Connolly
