Those of us that like nothing more than keeping up to date with European financial market regulatory affairs will be well acquainted with MiFID II (or, to give it its full name, The Markets in Financial Instruments Directive II). For those lucky enough not to have leafed through the hundreds and hundreds of pages of rules, restrictions and advice – here’s a rundown of what you need to know about the upcoming regulation:

What is MiFID II?

MiFID II is a far-reaching and broad set of regulations for the financial markets industry created by the European Union.

As the name suggests, is the second such piece of regulation aimed at making financial markets fairer, more accessible and more stable. The first directive targeted cash equity markets, but MiFID II has a much broader scope.

Why has it been created?

The new directive aims to (among other things) make markets more transparent, lower the cost of market data, improve so-called ‘best execution’, make trading behaviour more orderly and clarify the costs of trading & investing for those who buy the products.

Where will the rules be enforced?

The MiFID II directive was written up and will be enforced by the European Union – but that doesn’t mean it will only impact banks, financial institutions and brokers that are situated within the EU. Any firm looking to do business with a customer in the region will have to abide by the rules, regardless of whether the firm is American, Barbadian or Chinese.

When will the directive take effect?

MiFID II kicks in on the 3rd January 2018. While the regulators will be looking out for rule-breaking from that date, it’s highly likely that firms will begin abiding by the directive ahead of that date – so your interactions with financial markets could change well before the New Year.

Who will be affected by MiFID II?

In short, a seller or a consumer of a financial product will be affected by MiFID II if, and only if, the product falls into scope.

The FCA state that the impact of the directive will be limited to:

  • interdealer brokers
  • firms engaging in algorithmic and high-frequency trading
  • trading venues including regulated markets, multilateral trading facilities, and prospective organised trading facilities
  • prospective data reporting service providers
  • investment managers
  • stockbrokers
  • investment advisers
  • corporate finance firms and venture capital firms

More information on MiFID II can be found on the Financial Conduct Authority’s website here.