The Markets in Financial Instruments Directive (“MiFID”) came into force in November 2007 and made significant changes to the regulatory framework of financial services within the EU, introducing a harmonised regime for the regulation of investment services. On 8 December 2010, the European Commission (the “Commission”) published its long awaited consultation paper (the “Consultation”) setting out a review of MiFID. The proposals are intended to tie in with other recent international developments in the regulation of financial markets since the onset of the financial crisis, including the Dodd-Frank legislation in the U.S. and proposals in the EU in relation to the regulation of OTC derivatives and packaged retail investment products (“PRIPs”). The Consultation has been influenced by the Committee of European Securities Regulators (“CESR”) which conducted a number of consultations on specific aspects of MiFID and published resulting reports and technical advice.

We summarise below the Commission’s main proposals. Of particular note, the Commission proposes to introduce mandatory exchange trading requirements for standardised OTC derivatives, to extend the transparency and transaction reporting regimes and to make adjustments to the client classifications provisions. The proposals also envisage empowering supervisory authorities to ban certain investment services and activities in certain financial instruments and to intervene in derivative contracts.