ANALYSIS: The European Commission’s Legislative Proposals For Revising The Markets In Financial Instruments Directive
By Robert Finney and Cecilia Gozzoli, of Dewey & LeBoeuf LLP, London.
The European Commission on October 20, 2011, published two major legislative proposals in the European Union’s continuing programme of financial regulatory reforms driven by the 2008 financial crisis, namely proposals to update and revise the 2004 Markets in Financial Instruments Directive (“MiFID”) and the 2003 Market Abuse Directive (“MAD”). The legislative changes will affect almost everyone who transacts in securities, derivatives, funds, currency or commodities in the European Economic Area (“EEA”) (the 27 E.U. member states plus Liechtenstein, Iceland, and Norway) or with EEA clients or counterparties.
This Special Report summarises the package commonly referred to as MiFID II, being the proposals to recast MiFID and also (for the reasons explained below) to adopt a new regulation (a Markets in Financial Instruments Regulation, or “MiFIR”).
This Special Report aims to highlight key areas of impact.
MiFID sets standards across the European Economic Area for activities and services in relation to securities and derivatives, including the licensing and supervision of market operators and firms that conduct activities or provide services in those instruments. A limited review of MiFID was required by the directive itself, but delayed by the financial crisis. However, like much of the E.U. regulatory reform programme, the MiFID review owes a lot to lessons drawn from the financial crisis, but it has been driven also by the experience of the original directive in action, by evolution of trading markets and technology since MiFID was adopted in 2004, and by G-20 commitments to regulate commodity markets and require standardised derivatives to be traded on exchanges or electronic platforms.
The proposals are the product of more than two years of consultation by the European Commission (the “Commission”, the executive arm of the European Union) and the Committee of European Securities Regulators (which in January 2011 became the European Securities and Markets Authority, one of three new E.U. supervisory authorities). The broad thrust of the proposals are as canvassed by the Commission in its formal consultation document issued in December 2010 (see analysis by Robert Finney, of Dewey & LeBoeuf LLP, London, at WSLR, January 2011, page 27), but there have been some significant additions and little dilution.
The proposals have been published in tandem with the review of MAD because the Commission considers these directives to be closely connected in assuring the integrity, efficiency and competitiveness of E.U. financial markets…