ERM Glossary: Markets in Financial Instruments Directive (MiFID)

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The Markets in Financial Instruments Directive (MiFID) is a core pillar in EU financial market integration. It consists of a framework Directive (Directive 2004/39/EC), an implementing Directive (Directive 2006/73/EC) and an implementing Regulation (Regulation No 1287/2006). The original MiFID directive came into force in November 2007 and at the time of writing (early 2012) a new MiFID II Directive is being planned.

The overarching aim of MiFID is to enhance the integration, competitiveness and efficiency of EU financial markets and MiFID I abolished the requirement EU member states might have imposed to require trading in financial instruments to take place on traditional exchanges, therefore leading to EU-wide competition between exchanges.

MiFID II is expected to introduce further rules promoting competition and transparency in EU financial markets by requiring that all organised trading take place on a ‘regulated trading venue’, i.e. a regulated market, multilateral trading facility (MTF) or organised trading facility (OSF), by requiring appropriate pre and post trade transparency on all three types of regulated trading venue, by extending MiFID type rules currently applicable to any packaged retail product (PRIP) to also apply to equivalent structured products sold by investment firms or credit institutions and generally to upgrade market structure frameworks, corporate governance and organisation requirements on those firms that are active in markets (including algorithmic traders).

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