ESMA provides implementing rules for MiFID II

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Markets in Financial Instruments Directive II - ESMA provides implementing rules for MiFID II

December 2014

The ESMA has published on 19 December 2014 its final Technical Advice (TA) and launches a consultation on its draft regulatory technical and implementing standards (RTS/ ITS) regarding the implementation of MiFID II and MiFIR.

Once fully implemented MiFID II will have a significant impact on the EU’s Securities Market, MiFID II will provide greater transparency and improve the overall functioning of markets. The ESMA has published on 19 December 2014 its final Technical Advice (TA) and launches a consultation on its draft regulatory technical and implementing standards (RTS/ ITS) regarding the implementation of MiFID II and MiFIR.

MiFID II to include most financial instruments

  • Trading obligation for shares and double volume cap mechanism for shares and equity-like instruments;
  • Obligation to trade derivatives on MiFID venues (regulated markets, multilateral (MTFs) or organised trading facilities (OTFs)) only, in line with G20 requirements; increased trade transparency, for non-equity instruments, in particular bonds, derivatives, structured finance products and emission allowances;
  • Newly introduced position limits and reporting requirements for commodity derivatives;
  • Rules governing high frequency trading, imposing a strict set of organisational requirements on investment firms and trading venues;
  • Provisions regulating access to central counterparties (CCPs), trading venues and benchmarks, designed to increase competition in the Union; and
  • Requirements for a consolidated tape of trading data, including rules for tape providers, reporting, publication and sales of data.

MiFID II to improve investor protection

  • Clarifications about the circumstances in which portfolio managers can receive research from third parties;
  • Clarifications under which circumstances inducements meet the quality enhancement requirement for the provision of advice;
  • Requirements for investment firms manufacturing and/or distributing financial instruments and structured deposits to have product governance arrangements in place in order to assess the robustness of their manufacture and/or distribution;
  • Requirements for firms to provide clients with details of all costs and charges related to their investment, including cost aggregations, the timing of disclosure (ex-ante and ex-post); information to non-retail clients; the scope of firms subject to this obligation;
  • Information on the cumulative effect of costs on the return;
  • Organisational requirements for firms providing investments advice on an independent basis; and
  • Specification of powers for ESMA and national regulators with regards to prohibiting or restricting the marketing and distribution of financial instruments.

Next Steps

MiFID II/ MiFIR and its implementing measures will be applicable from 3 January 2017.

MiFID II
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