MiFID II stands for the Markets in Financial Instruments Directive, and is the second iteration of a sweeping directive. As such it is known as MiFID II.
The original Markets in Financial Instruments Directive (MiFID) became effective in November 2007.
It was intended as the foundation of the EU’s Financial Services Action Plan, a comprehensive project to create a single European market in financial services.
MiFID is intended to create a level playing field for firms to compete in the EU’s financial needs and to ensure a consistent level of consumer protection across the EU.
MiFID II rules come into force for the European financial sector on January 3, 2018, which are set to have far-reaching consequences for the industry.
MiFID II Explained
MiFID II relates to the framework of trading venues/structures in which financial instruments are traded.
MiFID is concerned with regulating the operation of the full range of trading venues and the processes, systems, and governance measures adopted by market participants.
The newest version of MiFID updates requires trading transactions and information to be more transparent than ever before.
MiFID II requires that all prices are posted before and after trades are completed, no matter the type of trading platform on which transactions occur.
Giving investors access to a whole new scope of data and information and enables them to make more educated decisions regarding their clients’ portfolios.
One of the primary purposes of this new requirement is to allow retail firms and their customers to find the best deals available by comparing prices and other factors from the newly available data.
MiFID II looks to substantially increase the protection of retail investors and severely limit the types of financial instruments with which retail investors can complete transactions without being legally obligated to consult a trader or similar professional.