The purpose of this briefing is to summarise some of the key changes that will be introduced by MiFID II, which is currently planned to be implemented across the EEA in 2014.
The Markets in Financial Instruments Directive ("MiFID") came into force on 1 November 2007 and was implemented in Ireland through the European Communities (Markets in Financial Instruments) Regulations 2007 (the "MiFID Regulations").
MiFID was subject to a mandatory post-implementation review and the EU Commission published a paper consulting on amendments to MiFID in December 2010. On 20 October 2011, following the consultation, the EU Commission published draft legislative proposals in the form of a draft Directive (the "Directive") and a draft Regulation (the "Regulation"), referred to together in this note as "MiFID II".
In very brief summary, MiFID II will introduce new post-financial crisis conduct of business requirements and will also seek to improve the transparency and regulation of the financial markets. It will lead to a more harmonised conduct of business and systems and controls framework for the investment services sector in Europe.
In a number of key areas the European Securities and Markets Authority ("ESMA") has been asked to prepare accompanying technical standards, which have not yet been published. Until these standards are available the full impact of MiFID II is difficult to assess.
Some of the key changes introduced by MiFID II are discussed in more detail below.
MiFID II will be broader than MiFID in terms of the scope of firms covered. For example, a wider range of commodities firms will be covered than is the case at present and certain data providers will fall within the scope of regulation for the first time. In addition, a broader range of products will be covered, including structured deposits and emissions allowances.
Custody services (i.e. safekeeping and administration of financial instruments) will become a core investment service instead of an ancillary service, which will bring standalone custodians in Ireland within the scope of the MiFID Regulations instead of the Investment Intermediaries Act 1995 (the "IIA").
A new regulated category of trading venue called OTFs (organised trading facilities) will be introduced; this is broadly intended to capture broker crossing systems and inter dealer broker systems.
In a fundamental development, the EU Commission is proposing to permit third country firms (i.e. non-EEA...