MiFID II

The Markets in Financial Instruments Directive is the EU legislation that regulates firms who provide services to clients linked to ‘financial instruments’ (shares, bonds, units in collective investment schemes and derivatives), and the venues where those instruments are traded.

Legal Entity Identifiers: what you need to do (PDF)

From 3 January 2018 firms subject to MiFID II transaction reporting obligations will not be able to execute a trade on behalf of a client who is eligible for a Legal Entity Identifier (LEI) and does not have one.

 

The Markets in Financial Instruments Directive (MiFID) is the framework of European Union (EU) legislation for:

  • investment intermediaries that provide services to clients around shares, bonds, units in collective investment schemes and derivatives (collectively known as ‘financial instruments’), and 
  • the organised trading of financial instruments

MiFID was applied in the UK from November 2007, but is now being revised to improve the functioning of financial markets in light of the financial crisis and to strengthen investor protection.

The changes are currently set to take effect from 3 January 2018, with the new legislation being known as MiFID II — this includes a revised MiFID and a new Markets in Financial Instruments Regulation (MiFIR).

Find out more in PS17/5: Markets in Financial Instruments Directive II implementation – Policy Statement I.

MiFID II — application and notification user guide

We have published a user guide to help firms decide which applications and notifications they should make ahead of the implementation of MiFID II.

Planning

Firms will need to start planning for the MiFID II changes ahead of the finalisation of the EU implementing legislation and the subsequent changes that we and the PRA make to our Handbooks, and changes that HM Treasury makes to financial services legislation.

MiFID II is a wide-ranging piece of legislation and, depending on your business model, could affect a wide range of your firm’s functions – from trading, transaction reporting and client services to IT and HR systems.

Non-equity pre-trade transparency waivers

Following on from the information provided below, please be aware that in order for us and ESMA to process waiver applications in time for 3 January 2018, the deadline for waiver applications for bonds and derivatives to be submitted to us is 1 June 2017 at the latest.

The FCA has a limited amount of time to review and assess waiver applications before we need to submit relevant applications to ESMA by 31 July 2017. We therefore require all waiver applications to be complete and for any queries regarding the process or the proposals that applicants intend to make to be raised and discussed with us in advance of the 1 June 2017 deadline.

If applications submitted by that date are not complete, for example if the applicant needs to provide additional information or amend details after 1 June, then we cannot guarantee to process the application in time for ESMA’s 31 July deadline.

Where applicants would like to discuss particular queries, please email your relevant supervisory contact at the FCA or, if you do not have a regular supervisory contact, please send your queries to [email protected].

We encourage complete waiver applications to be submitted to us in advance of the 1 June 2017 deadline where possible. Applicants should read the relevant information below and chapter 12 of the MiFID II application and notification user guide before completing their waiver application.

Pre-trade transparency waivers

On 19 December 2016 ESMA published Q&A on the process of how it delivers opinions to national competent authorities on pre-trade transparency waivers. In light of this we have written to UK operators of trading venues (PDF) attaching a waiver form (DOC). This letter is relevant to anyone who seeks to operate a UK trading venue under MiFID II.

The EBA recommends a new prudential framework for MiFID investment firms

The EBA have concluded that the Capital Requirements Directive (CRD) and the Capital Requirements Regulation (CRR) do not form an appropriate regime for the prudential regulation of the majority of investment firms. In a report to the European Commission (EC) published on 29 September 2017, the EBA outline the framework of an entirely new regime that focuses on the risks that investment firms pose to their customers and the markets in which they operate and, for the first time, introduces a basic liquidity requirement.

The report also includes recommendations on remuneration, governance and reporting requirements. It was published in response to a Call for Advice from the Commission who will now review the recommendations and are expected to publish a legislative proposal before the end of 2017.

This document will be of interest to all FCA solo-regulated MiFID investment firms, including those that will become regulated as a result of MiFID II.

Texts

2014

were published in the Official Journal of the European Union (OJEU)

2016

The European Commission adopted the: