MiFID II key proposals and impacts
Regulatory radar newsflash
The European Commission (EC) today published its proposals to amend the Markets in Financial Instruments Directive (MiFID), referred to as MiFID II, along with its proposed revisions to the Market Abuse Directive (MAD), referred to as MAD II.
The proposals introduce a range of measures which seek to address issues raised by the financial crisis, such as improving investor protection, as well as the commitments made by the G20 to improve the transparency and regulation of more opaque markets, such as derivatives.
The full impact of the changes will not be clear until the legislation is passed, by which time some controversial points could be omitted, and there is sight of the Level 2 and Level 3 proposals for both MiFID and MAD. However, firms should start to assess the potential market and business specific impacts of the proposals, for instance on the electronic trading of derivatives, and use these to inform their business plans. Similarly, they should look at the linkages between the various regulatory reforms in the EU and elsewhere, such as the Dodd-Frank reforms, to identify potential opportunities and synergies, thereby minimising the cost of implementing the amendments.
As the near final drafts of the MiFID II and MAD II proposals were widely circulated before their official release, the content is largely as expected. However, it is essential that the industry does not lose sight of the far-reaching nature of the changes to market structure and both retail and wholesale conduct regulation that flow from these proposals. The proposals include a Regulation and Directive for each of MiFID II and MAD II. This represents a major change in the level of direct European regulation for firms.
The enclosed briefing note sets out the key changes in the proposals and looks at the challenges now facing firms.