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MiFID II (Markets in Financial Instruments Directive II or MiFID Review) is the second version of the MiFID directive. Proposals for the reform, which were launched by the European Commission (EC) on Dec. 8, 2010,[1] were issued in final form on October 20, 2011.[2] The proposals then passed to the European Parliament and the individual member states for "negotiation and adoption."[3]

On September 25, 2012, the Committee on Economic and Monetary Affairs agreed unanimously to introduce MiFID II to the European Parliament, which later approved the measure. The Council of Ministers is expected follow suit, leaving the European Securities and Markets Authority (ESMA) to suggest detailed rules to the commission. The changes to MiFID resulting in MiFID II are currently set to take effect starting January 3, 2018, including a revised MiFID and a new Markets in Financial Instruments Regulation (MiFIR).[4] [5][6] According to the European Parliament's web site, all trading venues must ensure that trading systems are resilient and prepared to deal with sudden increases in order flows or market stresses. These could include 'circuit breakers' to suspend trading. Additionally, all orders "should be valid for at least 500 milliseconds, i.e. must not be cancelled or modified during that time."[7]

The second version is intended to tackle some of the issues missed by the original document. It also addresses concerns over high frequency trading. MiFID imposed new rules for equity trading across 30 European countries when it became law on Nov. 1, 2007, but traders argued that it should be expanded. Some suggested regulators should focus on the over-the-counter (OTC) markets.[8]

The expanded nature of the review created a groundswell of discontent within the market and among some policymakers.[9] For example, a provision that would force trade orders to be posted for at least half a second, far longer than HFT firms currently stay in the market, may result in a drop in liquidity and a rise in bid-ask spreads.[10]

MiFID II migrates the European regulatory landscape from a principles-based philosophy toward a more U.S.-style rules-based regulatory regime. It also extends the MiFID framework across asset classes and into markets in which central bid/offer markets and pre- and post-trade transparency have never existed. This is expected to have a tremendous impact on how OTC markets operate.[11] The possible extension of MiFID’s transparency requirements to non-equity markets is one of many areas the European Commission is expected to investigate, in line with the European Central Bank’s (ECB) efforts with the code of conduct for clearing and settlement.[12]

Summary of MiFID II


On January 14, 2014, the European Parliament, European Commission (EC) and Council of the European Union (EU) finished a crucial round of negotiations on Mifid II. The directive introduced a range of reforms that cover the trading of equities away from public stock markets, competition among derivatives markets and clearing houses, speculation in commodity and commodity derivatives markets, the ability of firms in non-EU countries to offer financial services in the EU and controls on electronic and high-frequency trading.[14]

In the new revised directive, OTFs are introduced to improve trading transparency in bonds and swathes of the world's $640 trillion over-the-counter financial derivatives. EU legislators decided to restrict the category to non-equities only.

The Insurance Mediation Directive (IMD 1) was amended through the revised MiFID II. [15]


  1. MiFID II. Linklaters.
  2. MiFID II - European Commission Publishes Proposed New Rules for Securities Markets. MondoVisione.
  3. New rules for more efficient, resilient and transparent financial markets in Europe. European Commission.
  4. MiFID II. Financial Conduct Authority.
  5. MiFID 2: A bigger bang. The Economist.
  6. EU lawmakers back curbs on high frequency share trade. Reuters.
  7. Financial trading rules: Economic Affairs Committee MEPs outline reform plan. European Parliament.
  8. Glossary. Fimmda.
  9. Mifid II timing spells two more years of doubt. Financial News.
  10. European Parliament votes for 500 ms resting time, other trading rules. Automated Trader.
  11. View From the Top: MiFID II Could Change The Global Balance Of Financial Markets Power. Deriv Alert.
  12. Mif II Holds Promise Of More Outsourcing. Dow Jones/Financial News.
  13. New rules for more efficient, resilient and transparent financial markets in Europe. European Commission.
  14. Views from the top: what the market makes of Mifid II. Financial News.
  15. MiFID: IMD 2 best place to regulate insurance investment products. The Financial.