Investors and financial firms get ready for the Mifid II regulatory revamp/shake-up!
Investors and financial firms get ready for the Mifid II regulatory revamp/shake-up!
One of the last packages of reforms following the banking crisis comes into force today 3rd January 2018, putting investors and financial firms in line for a major regulatory shake-up.
Europe’s Markets in Financial Instruments Directive – Mifid II – is an attempt to provide much greater protection and transparency to investors throughout the financial system.
The body of measures include rules covering the EU’s entire trading system, from brokers, hedge funds and institutional investors, to banks, exchanges and traders.
Among the changes, asset managers will now have to pay for the research that prompts their investment decisions, as regulators clamp down on potential conflicts of interest which could harm investors.
It will also attempt to help regulators pinpoint risks by making institutions report information about trades instantly, with bond traders having to tell the market about their deals within 15 minutes of them being secure.
Some of the key elements
• New transparency requirements for trading platforms to tell the wider market what prices are being offered so that investors can double-check they are getting the best deal;
• Much wider range of trades must be reported to regulators in a more standardised format. The data will be used by regulators to spot market abuses and by investors to highlight less competitive prices;
• Trading over the telephone replaced with electronic platforms in bonds and off-exchange derivatives to boost transparency;
• Systematic matching buy and sell orders for shares inside a bank will be more strictly regulated;
• High-frequency trading or ultra-fast trading rules updated;
• EU securities watchdog ESMA gets powers to restrict or ban financial products that are harmful;
• Banks and advisors must be clear about which type of investor is suitable for a product to avoid high-pressure sales that target everyone;
• Asset managers must be clear to customers about who pays for stock research they get from banks;
• Volume caps on off exchange trading;
• Position or size limits on how much of a commodity a broker can hold to avoid undue influence over market prices.
