European Parliament Votes in Favour of MiFID II

The European Parliament has voted in favour of updated rules for markets in financial instruments, a move that was welcomed by the Internal Market and Services Commissioner Michel Barnier. Barnier stated that the updated legislation will ensure proper functioning of the markets and enable countries to establish more safer and transparent financial systems that will help restore investor confidence.

MiFID is the Markets in Financial Instruments Directive (Directive 2004/39/EC), which replaced the Investment Services Directive (ISD) adopted in 1993. MiFID, in force since 2008, is one of the cornerstones of the EU’s regulation of financial markets. It seeks to create a single market for investment services and activities. The updated rules of MiFID II will ensure stronger investor protection and also create a stronger regime that enables harmonized effective administrative sanctions.

The key elements that mark the new legislation include introduction of a market structure framework that subjects equity and non-equity instruments to a trading obligation, closes loopholes and ensures that trading happens only on regulated platforms. MiFID II also increases transparency in the equity market and establishes the concept of transparency for bonds, derivatives and other non-equity instruments.

In addition, the new legislation strengthens supervisory powers, prevents market abuse and supports orderly pricing by providing for a standardized position limits regime. It will also introduce a new algorithm for controlling programmed trading activities.

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