Markets in Financial Instruments Directive
From MarketsWiki
The Markets in Financial Instruments Directive (MiFID), which took effect on Nov. 1, 2007, is the plan to introduce significant changes to Europe’s regulatory framework with the goal of integrating Europe’s national markets.
Included in the directives are new pre- and post-trade transparency requirements and reporting requirements for equity markets, new capital requirements and other provisions intended to facilitate cross-border business.[1]
MiFID eliminated the "concentration rules," formerly prevailed in Europe, that required that stocks be traded through local markets. It paved the way for electronic trading platforms to compete with the established stock exchanges and introduced the concept of a multilateral trading facility (MTF).
Also, under MiFID, buy- and sell-side firms must prove they have provided their customers with "best execution" - including not only the price of the security but also implicit costs related to liquidity and market impact.[2]
Greenwich Research
Research released late in October 2007 from Greenwich Associates reveals that a majority of European institutional investors believe that new financial market rules have a good chance of achieving regulators’ stated goals of increasing market transparency and further integrating Europe’s capital markets.[3]
More than half the institutions participating in Greenwich Associates’ 2007 European Equity Investors Study believe that MiFID will increase the transparency and depth of European equity markets, while slightly less than a quarter expect reductions. Thirty-five percent of the institutions participating in Greenwich Associates’ 2007 research program expect MiFID to increase liquidity in European equity markets, while 20 percent expect it to reduce liquidity.
“Half the institutions we interviewed say MiFID will increase clients’ ability to measure and achieve best execution, while only 17 percent think the rules will make it harder for clients to assess best execution,” says Greenwich Associates consultant John Colon.
However, more than three-quarters of the institutions believe that MiFID will place mid-sized and regional brokers at a disadvantage, and 55 percent think the new rules favor major broker-dealers. “Our research suggests that the benefits of the new regulations will not be evenly distributed,” says Greenwich Associates consultant Jay Bennett. “Europe ’s institutions expect that there will be winners, including the institutions themselves, large broker-dealers and electronic trading venues — which will benefit from the integration of markets and new requirements governing best execution and transparency. They also believe there will be losers, including smaller broker-dealers and exchanges.”
SIFMA Opening-day Statement On Nov. 1, Karsten Moller, senior managing director and head of The Securities Industry and Financial Markets Association (SIFMA) Europe and Asia, remarked in regard to the Markets in Financial Instruments Directive becoming law in Europe, “We and our members are confident in the ability of MiFID to deliver on its important objectives of fostering a competitive and integrated market that adequately protects investors,”..."Clearly there will be teething problems with implementation. However, we will do all we can to make to make the legislation work and we will monitor its implementation." [4]
References
- ↑ "Waking up to the impact of MiFID,” 11/28/07. www.hedgeweek.com. Retrieved on Nov. 29, 2007.
- ↑ ATSs in Europe Follow U.S. Lead. Securities Industry News. Retrieved on June 12, 2008.
- ↑ "Market Risk - Investors Optimistic About New Rules Designed to Integrate European Equity Markets". Global Association of Risk Professionals. Retrieved on October 23, 2007.
- ↑ "Importance of MiFID Underscored ". SIFMA. Retrieved on Nov. 1, 2007.
