B.I.S.S Research White Papers

Impact of MiFid II and MIFIR 2 Years On

Martin Sexton

Martin Sexton

I have over 20 years' experience in Financial Services. I have a good blend of business and technical expertise which has allowed me to effectively communicate ideas, concepts and solutions to stakeholders at all levels.
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On 20th October 2011, the European Commission published two proposals: the revised Markets in Financial Instruments Directive (MiFID II), along with Markets in Financial Investments Regulation (MiFIR).

Two years on from the entry into force of Europe’s Markets in Financial Instruments Directive (Mifid II), the deleterious impact on equity research is now clearly apparent.

Mifid II’s squeeze on brokers’ revenues is industry-wide. Individual firms will always argue it is hurting rivals more, but it is clear that smaller houses specializing in stocks with a small and medium-sized market capitalization are suffering most.

Both the Directive and Regulation aimed to establish a safer and more transparent financial system by enhancing regulatory requirements, market transparency and investor protection. This initiative is broken down into three main parts:

  • Best execution and surveillance;
  • Monitoring and compliance; and
  • Regulatory reporting and transparency.

MIFID II/MIFIR set out a number of reporting obligations in relation to the disclosure of trade data to the public and competent authorities. This replaces the original MiFID reporting requirements, that primarily focused to exchange traded equity instruments.  The asset classes within scope of MiFID II include:  Equities, FX, Interest Rates (this asset class includes Fixed Income),Credit and Commodities and encompasses multiple  contract styles (e.g. swaps, forwards, etc… )  within each asset class.

Given the greater coverage of financial products, more firms will be caught by the reporting obligations. This includes portfolio managers, who can no longer rely on sell side brokers to report on their behalf and under certain circumstances this result in the need for the buy-side to report a trade to an APA.

It is possible that much of the frustration is stemming from the unarguably painful transition, and MiFID II new pre- and post-trade transparency requirements have made the trading process more complicated,”

Richard Johnson, principal market structure and technology at Greenwich Associates.

One thing is certain, there is no going back now. European equity traders will adjust to this new normal, as new products are introduced and new service models evolve to help them along this transition.

Learn more at https://isitc-europe.com/mifid-ii-mifir-demystified/

Martin Sexton

Martin Sexton

I have over 20 years' experience in Financial Services. I have a good blend of business and technical expertise which has allowed me to effectively communicate ideas, concepts and solutions to stakeholders at all levels.
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