Markets in Financial Instruments (MiFID II)

MiFID II, the regulations which went live in the European Union at the start of 2018 aims to make financial markets more efficient, resilient and transparent, and strengthen the protection given to investors.

The requirements have impacted many areas within financial markets. The sheer size and breadth of the rules have required significant effort of firms to implement suitable solutions and many have struggled to finish in time.

Despite all this spent time and effort, additional maintenance work is required. Since January 2018 the ESMA alone has published over 80 documents directly related to MiFID II. The topics covered range from guidelines for suitability, position limits, product governance to Q&A for commodity derivatives. Just to assess the applicability of this stream of documents calls for continuous energy and the end is not yet in sight.

In addition to keeping on top of requirements, firms have started to test and evaluate the design and operating effectiveness of the MiFID II measures taken. The first step, defining an appropriate risk and control framework, is a daunting task considering the volume of directives, regulations, delegated directives and regulations and guidelines.

The subsequent assessment activity is also an ongoing challenge. A firm must stay within the boundaries of MiFID II permissions and comply to MiFID II obligations and prohibitions. Most firms have chosen for a risk-based assessment approach, focusing on specific topics such as client related obligations or regulatory reporting requirements. Ideally, the loop between applicable requirements, impact analysis, defined and implemented measures and compliance is closed. In practise, disconnects are common and compliance assessment remains an add-on, a distinct activity.

Implementation / enforcement 07/2010 - 10/2011
Discussion / consultation 10/2011 - 06/2014
Implementation / enforcement 06/2014 - 01/2018
In effect 01/2018 -

MiFID II measures apply from 3 January 2018.


What to expect in the coming period? The European Commission is required to present a report in 2019 to the European Parliament and the council on the functioning and impact of the MiFID II framework. This report will cover topics such as: the Organised Trading Facility (OTF), algorithmic trading rules and the disclosure of any fees, commissions and non-monetary benefits in connection with the provision of an investment service or an ancillary service to the client.

Irrespective of the outcome of the above report we can expect enhanced or new MiFID requirements. Considering MiFID II is based on assumptions defined in 2008, the impact of the market due to MiFID II rules, changed global and European economic, market and technical developments will require a second recast of the Markets in Financial Instruments framework.

Further information:
European Commission: MiFID II
MiFID II en MAD II: geen tijd voor rust

Rob Voster Senior Manager
Categories: Financial Market Organisation