MiFID II Definition
MiFID stands for Markets in Financial Instruments Directive. MiFID II is the second iteration of the directive which first came into effect on the 1st of November 2007. The sequel MiFID II came into effect on the 3rd of January 2018. The directive must be followed by all investment service providers who are regulated by an EU member state.
One of the purposes of MiFID is to ensure the protection of investors. It also intends to increase transparency through imposing reporting requirements and enforce certain rules regarding how orders can be executed. It also enforces a number of rules to aim to strengthen the integrity of the markets too. Such rules include how financial services firms remunerate their employees.
Some of the key features that increase retail investor protection include:
- Best execution policies and public disclosure of execution quality data,
- Heightened reporting to regulators including pre-trade and post-trade reporting requirements,
- Client categorization and appropriateness testing.