Directive MiFID

MiFID (The Markets in Financial Instruments Directive) is Directive On "markets in financial instruments" developed by the EU with the participation of the British regulator FCA in 2007 for member countries of the European Union. Previously, the Directive "On investment services" the Investment Services Directive (ISD), but it lost force in connection with the formation of the European Union. The main objective of MiFID is to harmonize regulations in the financial sector for all 28 countries of the EU and the three countries belonging to the European economic area (Norway, Iceland and Liechtenstein). But each country can create its own governing body and issue its Directive, for example, FCA UK, CySEC in Cyprus, BaFIN in Germany etc. are Important to the activity of these regulators was consistent with the structure of the MiFID.

The main goal of MiFID is to regulate the transactions on the European stock exchange, providing the maximum possible protection to its participants. The Directive applies to all EU countries and is binding. As the market is not in place, after a certain time the current Directive was required to make changes. So there is a new Directive, MiFID 2, which became a continuation of the previous rules. It was developed by a special Commission with the participation of the G-20 in 2011. The new Directive broadened the services available on the market of exchange transactions, defines the powers of regulatory bodies and changes in requirements to investors.

MiFID imposes the following requirements and tasks:

  • Financial institutions are required to divide all customers into categories. Thanks to this, the company is interested in the awareness of its customers in the financial field and offers suitable for their services, which increases the level of investment protection;
  • Execution of transactions should be instant, immediately after sending the requestntom;
  • All financial institutions must inform customers about trading conditions in full;
  • MiFID contributes to the creation of a transparent single market, giving its participants more favorable terms of trade;
  • Under MiFID the issuing of licenses to financial institutions operating in the territory of the European Union, and performed their monitoring and regulation;
  • Set standards that are binding for all financial institutions.

It should be noted that the scope of MiFID is mainly spread in the stock, commodities, commodity and futures markets. With regard to the Forex market, operations of insurance agencies and Amateur bidders, as well as transactions and operations of Central banks, the effect of MiFID does not apply to them.

Thus, the MiFID Directive is the main document defining the rights and obligations of financial institutions and protecting the interests of investors. Without it cannot function any financial institution in the EU. But it is not a regulator, it cannot issue licenses and regulate the activities of companies. MiFID is a set of rules and regulations that govern European regulators when making decisions with respect to a financial company.