The Review Of The Markets In Financial Instruments Directive: The European Commission Publishes Legislative Proposals

White & Case LLP

The Markets in Financial Instruments Directive (2004/39/EC) (“MiFID”) and implementing legislation, in force since November 2007, sets out a framework for regulating investment services in financial instruments provided by investment firms and credit institutions. MiFID also provides a framework for the regulation of trading venues together with a pre- and post trade price transparency regime for equities. Its aim was to promote the integration, efficiency and competitiveness of EU financial markets while ensuring adequate protection for investors in financial instruments.

The review of MiFID launched by the European Commission (the “Commission”) in 2010 resulted in the publication on 20 October 2011 of some very wide ranging proposals that have significant implications for market participants. The Commission cites a number of reasons to explain why these changes are necessary, including the failure of MiFID adequately to deliver its promised benefits, changes in technology and trading behaviours and the high level governmental responses to the financial crisis. Accordingly the proposals seek to address the objectives originally set for MiFID while responding to new regulatory challenges posed by changes in the financial markets and some aspects of the financial crisis. The proposals rely heavily on the role of the European Securities and Markets Authority (“ESMA”) on which significant new powers and responsibilities would be conferred. The proposals would also require ESMA to develop advice on a very wide range of detailed technical and implementing measures.

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