After two years of negotiations, on 14th January 2014 a high-level agreement was reached between the European Parliament, the Council and the Commission on the updated rules for markets in financial instruments which are designed to address certain shortcomings of the first Directive.
The key elements of the Directive are expected to be as follows:
- The introduction of a market structure framework – the objective of which is to ensure trading (whenever appropriate) takes place on a regulated platform;
- The increase in equity market transparency and the establishment of the transparency principle for non-equity instruments such as bonds and derivatives;
- Harmonised position-limits regime for commodity derivatives with the objective to improve transparency;
- Implementation of a new framework which will improve conditions for competition in the trading and clearing of financial instruments as well as the introduction of trading controls for algorithmic trading activities;
- Stronger investor protection by means of the following measures: the introduction of better organisational requirements, strengthened conduct rules, the distinction between independent and non-independent advice, and harmonised powers and conditions for ESMA to prohibit or restrict the marketing and distribution of certain financial instruments;
- Strengthening the existing regime in order to ensure effective and harmonised administrative sanctions;
- Harmonised regime for granting access to EU markets (EU passport) to firms from third countries whose rules are equivalent to the new EU rules.
The new rules which will apply to investment firms, market operators and services providing post-trade transparency information in the EU will take will come in the form of a Regulation (MiFR) and a Directive (MiFID II). However, since the agreement reached at this stage is still very much high-level, the proposed text of the Directive and/or the Regulation are not expected to be released/ published anytime soon to an industry that awaits the specifics with much anticipation.
Many operators feel that the 2016 implementation target seems rather ambitious, particularly in the context of so much new regulation having been implemented within the financial services industry over the past five years. Whether or not these time-frames will change is yet to be seen.