The Markets in Financial Instruments Directive 2004/39/EC (known colloquially as "MiFID") as subsequently amended is a European Union law that provides harmonized regulation for investment services across the 31 member states of the European Economic Area (the 28 EU member states plus Iceland, Norway and Liechtenstein). The directive's main objectives are to increase competition and investor protection in investment services.
After its initial implementation, MiFID was intended to be reviewed. After extensive discussion and debate, in April 2014, the European Parliament approved both MiFID II, an updated version of the original MiFID law, and MiFID II's accompanying regulation, MiFIR. The directive and regulation include fewer exemptions and expand the scope of the original MiFID to cover a larger group of companies and financial products. Both MiFID II and MiFIR are effective from 3 January 2018.
MiFID II and MiFIR will ensure fairer, safer and more efficient markets and facilitate greater transparency for all participants. New reporting requirements and tests will increase the amount of information available and reduce the use of dark pools and OTC trading. The rules governing high-frequency-trading will impose a strict set of organizational requirements on investment firms and trading venues, and the provisions regulating the non-discriminatory access to central counterparties (CCPs), trading venues and benchmarks are designed to increase competition.
The protection of investors is strengthened through the introduction of new requirements on product governance and independent investment advice, the extension of existing rules to structured deposits, and the improvement of requirements in several areas, including on the responsibility of management bodies, inducements, information and reporting to clients, cross-selling, remuneration of staff, and best execution.