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European Union Reaches an Agreement this Week on MiFID II

After three years of review and consultation, the European Union agreed Tuesday January 14, 2014 to adopt MiFID II regulation, with some modifications. Still in preliminary stages, MiFID II, or the Markets in Financial Instruments Directive, contains numerous stipulations that attempt to increase the transparency and safety of the financial markets.

Key highlights of MiFID II include the creation and utilization of Organized Trading Facilities (similar in concept to SEFs), tighter regulation of algorithmic trading in an effort to ensure market liquidity, and a restriction on the dark trading of shares and equities.

In a press release issued by the European Commission, Commissioner Michel Barier explains that: “The MiFID II reform means that organized trading of financial instruments must shift to multilateral and well-regulated trading platforms. 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. 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.”

While the European Union reached consensus this week, general compliance with MiFID II is not expected until 2016.

About the author

Nik Venema's picture

Nik Venema

Communications Manager, FINCAD

Nik Venema weaves FINCAD's written and visual narrative across its suite of fast, accurate, flexible, transparent, and holistic valuation and risk solutions. Prior to this, Nik worked in Quantitative R&D at FINCAD as a Technical Writer and Financial Engineer. Nik holds an undergraduate degree in Finance from the University of the Fraser Valley and an M.Sc. in Finance from Simon Fraser University. Addtionally, Nik is an Instructor of Financial Engineering and Risk Management in the University of the Fraser Valley.

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