BLOG: MiFID II

MiFID II: A Comprehensive Regulatory Framework for Financial Markets

The Markets in Financial Instruments Directive II (MiFID II) represents a significant regulatory overhaul in the European Union's financial sector. In effect since January 3, 2018, MiFID II builds upon its predecessor, aiming to make financial markets more efficient, resilient, and transparent while increasing investor protection.

Key Objectives of MiFID II

MiFID II addresses several critical aspects of financial markets:

• Enhancing transparency for better market functioning.
• Improving investor protection by tightening regulations on investment advice and cost transparency.
• Strengthening regulatory compliance to ensure fair market practices.
  
  

Scope and Structure of MiFID II

MiFID II applies to a wide range of financial instruments and services, including rules for investment firms, trading venues, and market structures. It comprises a layered structure with the main rules in the MiFID II directive (Level 1), detailed regulations in delegated acts (Level 2), and guidelines and Q&As from ESMA (Level 3).

Focus Areas of MiFID II

MiFID II addresses several areas:

• Cost transparency and investor protection.
• Best execution obligations.
• Market structure and transparency, introducing new trading platforms like Organised Trading Facilities (OTF).
• Expanding transaction reporting requirements.
• Mandating Legal Entity Identifier (LEI) for transactions involving legal entities.
  
  

Supervision and Compliance

In the Netherlands, the Dutch Authority for the Financial Markets (AFM) oversees compliance with MiFID II. The AFM ensures investor protection and proper functioning of capital markets, focusing on transparency, product development, and market structure.

FAQ

What is MiFID II?

MiFID II is a European directive regulating investment services and financial markets, designed to make markets more efficient, transparent and protective of investors.

What are the key changes introduced by MiFID II?

Key changes include stricter investor protection rules, enhanced transparency requirements, expanded transaction reporting and new obligations for trading venues and financial instruments.

Who is affected by MiFID II?

MiFID II affects a wide range of market participants, including banks, asset managers, investment firms and trading venues across the European Union.

How does MiFID II enhance investor protection?

MiFID II strengthens investor protection through stricter rules on investment advice, clearer cost transparency and ensuring the best possible execution of client transactions.

Who supervises compliance with MiFID II?

In the Netherlands, the Dutch Authority for the Financial Markets (AFM) oversees compliance with MiFID II, focusing on investor protection and maintaining market integrity.