Europe Agrees MiFID II Framework for Regulating Securities Markets

The European Parliament (EP) and its council of ministers announced that the drafting of the revised Markets in Financial Instruments Directive, aka
MiFID II
, has been finalised. It added that the legislation updating the original MiFID, which ended the monopoly of local stock markets, represented ‘a comprehensive rewrite of the rulings by which trading in financial markets should be adhered’.

The agreement came after three years of complex negotiation between European Union (EU) member states and involved complex trade-offs between Germany, the UK, France and the EP and Commission.

It represents Europe’s biggest overhaul of securities markets since the 2008 financial crisis. Aimed at increasing transparency and stability, MiFID II extends the regulatory reach into off-exchange dealing, commodity speculation and new technologies.

“Strict transparency rules will ensure that dark trading of shares and other equity instruments which undermine efficient and fair price formation will no longer be allowed,” announced Michel Barnier, the European Commission’s (EC) financial markets commissioner.

“They are a key step towards establishing a safer, more open and more responsible financial system and restoring investor confidence in the wake of the financial crisis.

“Although I regret that the Commission’s proposed ambitious transparency regime for non-equity instruments, such as bonds and derivatives, has not been fully achieved, MiFID II represents an important step in the right direction towards greater transparency in this area.”

The finalised rulings, as issued by the EC, pave the way for the introduction under MiFID II of a market structure framework which closes loopholes and ensures that trading, wherever appropriate, takes place on regulated platforms.

The political agreement will enable the European Securities and Markets Authority (Esma) to resolve technical issues. Negotiators expect MiFID to enter into law in the second quarter of this year and become compulsory at the end of 2016.

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