The Markets in Financial Instruments Directive (MiFID)

The Markets in Financial Instruments Directive, commonly referred to as MiFID, is a pivotal legislative framework within the European Union designed to regulate the markets for financial instruments for trading, investment services, and activities across the EU. It aims to increase transparency, enhance competition, and offer greater consumer protection in financial markets. MiFID covers a wide array of financial instruments including shares, bonds, derivatives, and various investment schemes.

The original directive, which came into effect in November 2007, marked a significant step towards the integration of the European financial markets. It established standardized regulations for the services related to financial instruments and the platforms where they are traded, which helped facilitate cross-border financial services while ensuring a stable and effective functioning of the markets.

In response to the financial crisis of 2008 and to address various market developments and technological advances, the EU instituted a revised and more comprehensive version of this directive, known as MiFID II, along with the Markets in Financial Instruments Regulation (MiFIR) to tighten the regulatory framework. Approved in April 2014 and implemented in January 2018, MiFID II significantly expanded the scope of the rules to include more companies and financial products, emphasizing stricter transparency and reporting requirements, broader market structure reforms, and enhanced investor protections.

MiFID II aims to:

This directive has fundamentally changed how EU financial markets operate, influencing market practices and the strategic decisions of financial firms across Europe and globally, given the interconnected nature of financial markets.