MiFID I was launched with the highest of hopes. It was intended to turbo-charge cross-continental trade in financial services. Its aim was to allow firms from across the European Union to compete with each other across jurisdictions and thereby to increase consumer choice and improve consumer outcomes.
Having been years in the planning and having endured much scrutiny and revision, MiFID I finally came into force in November 2007 – and was almost immediately overtaken by the Global Financial Crisis.
It was the Global Financial Crisis that gave rise to MiFID II and it is against the background of the Global Financial Crisis that MiFID II can best be understood.
MiFID II brings more activities and products within the scope of financial services regulation, introduces new transparency requirements and establishes new consumer protections.
By increasing and targeting the scope of financial services regulation, MiFID II aims to decrease the chances of further economic turbulence.
While the following were not regulated under MiFID I, they fall squarely with the scope of MiFID II.
Under MiFID II, operating organised trading facilities (OTFs) will be a regulated activity. While regulated markets and multilateral trading facilities (MTFs) are already regulated, OTFs have not hitherto been regulated.
An OTF is a multilateral discretionary trading platform. Unlike MTFs, the operator of an OTF has discretion when matching orders.
Firms in this space need to be aware of their forthcoming obligations.
Structured deposits and emissions allowances will be regulated under MiFID II.
General trade transparency requirements
Trading venues and investment firms will have to comply with more wide-ranging transparency rules. These will apply both pre and post-trade.