MIFID II: Challenges to expect

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MIFID II: Challenges to expect

MiFID is a wide-ranging piece of legislation. Building on rules already in place since 2007, the new rules are designed to take into account developments in the trading environment and, in the light of the financial crisis, to improve the functioning of financial markets to make them more efficient, resilient and transparent.
Depending on your firm's business model, the legislation could affect a good number of its functions.

The MiFID II 'Level 1' framework agreed in 2014 has been supplemented in many areas by various implementing measures (known as 'Level 2' legislation). These measures took two forms:

  • "Delegated acts", drafted by the European Commission (EC) on the basis of advice from the European Securities and Markets Authority (ESMA)
  • "Technical standards", drafted by ESMA and approved by the EC

ESMA provided advice on the delegated acts to the EC at the end of 2014 and delivered draft technical standards on
29 June, 28 September and 11 December 2015.

The EC is in the process of endorsing the technical standards and recently adopted the delegated acts; they are now subject to scrutiny by the European Parliament and Council before they come into force.
Countries have until 3 July 2017 to adapt their domestic laws and regulations to the revised legislation, but much of MiFID II takes the form of regulations which are directly applicable.

Level 3 guidelines have been issued on the assessment of knowledge and competence, and on cross-selling practices. Further guidelines are expected from ESMA in the course of 2017 in order to bring additional clarification on sensitive areas such as inducements, product governance and cost transparency.

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