MiFID II Complete Guide
Markets in Financial Instruments Directive II - comprehensive implementation guide.
View original at European Securities and Markets Authority
MiFID II / MiFIR Complete Guide
The Markets in Financial Instruments Directive II (MiFID II) and Regulation (MiFIR) form the cornerstone of EU securities market regulation.
Scope and Application
Entities Covered
- Investment firms
- Credit institutions (for investment services)
- Market operators
- Data reporting service providers
Services Covered
- Reception and transmission of orders
- Execution of orders
- Dealing on own account
- Portfolio management
- Investment advice
- Underwriting
- Placing
Market Structure
Trading Venues
-
Regulated Markets (RMs)
- Traditional stock exchanges
- Full regulatory requirements
-
Multilateral Trading Facilities (MTFs)
- Alternative trading venues
- Similar rules to RMs
-
Organised Trading Facilities (OTFs)
- New category for non-equity
- Bonds, derivatives
-
Systematic Internalisers (SIs)
- Dealing on own account
- Quote obligations
Transparency Requirements
Pre-Trade Transparency
- Equity: Bid/offer prices and depth
- Non-equity: Quotes for liquid instruments
Post-Trade Transparency
- Real-time publication of trades
- Deferrals for large trades
Waivers
- Large-in-scale waivers
- Reference price waivers
- Negotiated trade waivers
Investor Protection
Client Classification
- Retail clients (highest protection)
- Professional clients
- Eligible counterparties (lowest protection)
Suitability and Appropriateness
- Know your customer
- Product suitability assessment
- Appropriateness for non-advised
Best Execution
- Best possible result
- Execution factors: price, costs, speed, likelihood
- Execution policy disclosure
Product Governance
- Target market identification
- Product testing
- Distribution controls
Costs and Charges
Ex-Ante Disclosure
- All costs upfront
- Aggregated and itemised
- Impact on returns
Ex-Post Disclosure
- Annual statement
- Actual costs incurred
Inducements
Ban on Inducements
- For independent advice
- For portfolio management
Enhanced Quality Test
- For non-independent advice
- Client benefit requirement
Reporting Requirements
Transaction Reporting
- T+1 to competent authorities
- 65 data fields
- Legal Entity Identifiers (LEIs)