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MiFiD

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Key dates in the evolution and implementation of the MIFID (Markets in Financial Instruments Directive)

February 2006	Recommendations for the MIFID were published
March 2006	UK HM Treasury's consultation on the legislative changes required by MiFID came to an end
June 2006	The ESC agreed the text with adoption of these measures expected in September 2006
November 2006	The UK Presidency proposed an additional six months in which to finalise their preparations, resulting in an implementation date of January 2007
January 2007	Revised draft was amended to set this date by which financial authorities in Member States must integrate MiFID's regulations into domestic law

The old ISD Investment Services directive will be replaced by MIFID, which is a major part of the European Union Financial Services Action Plan. MIFID provides the following
	Extends the coverage of the current ISD regime too cover commodity derivatives, credit derivatives and financial contracts for differences (CFD's) Introduces additional requirements on investment and asset management firms, mainly on their conduct and internal organisation More extensive transaction reporting requirements

There are two parts of MiFiD legislation
	Level 1 - The directive itself Level 2 - Technical implementing measures

MIFID introduces more detailed requirements covering

	the organisation and conduct of business of investment firms, and how regulated markets and MTFs operate. new pre-and post-trade transparency requirements for equity markets; the creation of a new regime for 'systematic internalises' of retail order flow in liquid equities; and more extensive transaction reporting requirements.

Types of firms to be regulated by the MIFID requirements are

	investment banks; portfolio managers; stockbrokers and broker dealers; corporate finance firms; many futures and options firms; some commodities firms.


Most firms that fall within the scope of MiFID will also have to comply with the new Capital Requirements Directive (CRD), which is similar to Basel II, which will set requirements for the regulatory capital which a firm must hold. Those firms newly covered by MiFID will be subject to directive based capital requirements for the first time.

Firms that will be covered by minimum capital and Basel II regulations, but never did before include

	corporate finance firms; many futures and options firms; and some commodities firms. investment banks; portfolio managers; stockbrokers and broker dealers;

Key areas affected by MiFiD

	investment advice regulation is now within the scope of EU regulation commodity derivatives are now a financial instrument for the purposes of MiFIDs compliance arrangements have been altered for affected firms internal systems and controls outsourcing record-keeping systems to manage conflicts of interest have been changed safeguarding of client financial instruments or money held by firms new client categorisation regime best execution - firms will be required to get the best possible deal for their clients, taking not just price into consideration, but cost, speed and likelihood of execution / settlement Passporting rights, if a firm sets up in another EU member state, the host country is responsible for ensuring compliance with conduct of business requirements where services are provided within its territory Pre-trade equity transparency. A firm must provide published bid and offer quotes in liquid shares for orders below a 'standard market size' Post-trade equity transparency Transaction reporting - shift the reporting emphasis to the competent authority of the home/host state of firms and not to the competent authority of the regulated markets on which the instrument is traded

MiFID will require transaction reports for any instrument admitted to trading on a regulated market including commodity instruments e.g electricity, oil and metals admitted to trading on exchange.

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MiFiD

MIFID provides the following

Types of firms to be regulated by the MIFID requirements are

Key areas affected by MiFiD