On January 3rd 2018, MiFID II came into force. The acronym stands for Markets in Financial Instruments Directive. MiFID II is the successor and revised version of MiFID which had been, until the start of 2018, the cornerstone of the European Union’s (EU) regulation of financial markets.
WHAT IS MiFID II?
MiFID II is a comprehensive set of rules applied on investment services and activities throughout the 31 member states of the European Economic Area (EEA). European Commission (EC) aims to increase competition and consumer protection, by promoting a fair, transparent and efficient single financial market for investment services and activities, and to ensure a high degree of harmonised protection for investors in financial instruments. MiFID II also seeks to restore investors’ confidence following the financial crisis that hit the European Union economies in 2007-2008, causing detrimental crisis within the financial markets.
HOW MiFID II BENEFITS INVESTORS?
- Increased market transparency
- Investors will be able to know all costs and charges before making an investment.
- Investors can have access to more information than before, since institutions are allowed to distribute economic and fixed income research for zero cost, as long as it is available for the public.
- MiFID II extends the conduct of business rules to new asset classes and limits the “execution only” regime to “non-complex” products. All asset classes, with the exception of Foreign Exchange (FX) Spot, are covered as part of MiFID II.
- Provisions regarding the suitability and appropriateness of investments are strengthened in order to ensure that risks are transparent and understood by investors.
MiFID II IMPACT ON FINANCIAL INDUSTRY
- Asset classes that had been previously exempt from any reporting obligations, must be now reported under MiFID II rules.
- A greater range of investment firms are obliged to report any transactions they make.
- A system for setting position limits for commodity derivatives is introduced.
- Institutions are required to report information about most trades immediately, including price and volume.
- Implementation of new rules on research and inducements.
STO AND MiFID II
The MiFID II legislation is designed to provide greater protection to investors and improve transparency across the European financial markets. STO always strives to ensure it is and remains to be compliant with the MiFID II rules.
Trading Forex and CFDs, which are leveraged products, involves significant risks of loss