EU MiFID
EU MiFID EU 6 EU The Market in Financial Instrument Directive, MiFID MiFID Investment Service Directive, IDS EU 2004 4 EU 2006 4 30 EU 4 2007 11 1 EU MiFID FSA MiFID FSA 1
EU MiFID 2006 6 EU The Market in Financial Instruments DirectiveMiFID 1 EU 5 FSA MiFID 2 MiFID MiFID FSA 2002 10 3 EU FSA MiFID FSA MiFID EU MiFID EU EU MiFID 4 EU 2006 2 6 EU MiFID implementing measures ESC 1 Draft COMMISSION DIRECTIVE implementing Directive 2004/39/EC of the European Parliament and of the Council as regards organizational requirements and operating conditions for investment firms, and defined terms for the purposes of that Directive, Commission of the European Communities,6/02/2006. 2 Financial Service Authority Implementing MiFID s best execution requirements, Discussion Paper 06/3, May 2006. 3 Financial Service Authority Best execution, Consultation Paper 154, October 2002. 4 2004 EU 41 2003 3 EU 42 2003 6 2
MiFID DIRECTIVE 2004/39/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 21 April 2004, on market in financial instruments amending Council Directives 85/611/EEC and Directive 2000/12/EC of the European Parliament and of the Council and repealing Council Directive 93/22/EEC 1993 Investment Service DirectiveISD 2004 4 EU EU EU 1985 92 Single Market Program single passport EU ISD CAD UCITS EU 1990 EU EC 1997 Single Market Review 1999 5 Financial Services Action PlanFSAP 5 FSAP 4 42 ISD 1993 ISD EU investment firm 6 90 ISD FSAP 5 FSAP EU 18 4 4 6 ISD 1 3
7 conduct of business obligations ISD 2001 11 2 2002 11 8 ISD 2003 9 2004 4 MiFID MiFID MiFID 71 4 73 9ISD 32 ISD MiFID MiFID MiFID regulated market 36 7 2004 44 8 Proposal for a Directive of the Parliament and of the Council on Investment Services and Regulated Markets, and Amending Council Directive 85/611/EEC and European Parliament and Council Directive 2000/12/EC. 9 MiFID 2 4
47 12 36 1 competent authority market operator 36 1 37 38 4 39 40 transparent and non-discriminatory rules 42 1 2 3 MTF Alternative Trading SystemATS MiFID 4 1 15 Multilateral Trading FacilityMTF A (8) 14 26 29 30 35 4 MTF ISD 14 3 MiFID MiFID MTF 22 2 28 1 2 5
internalization 18 MiFID 22 2 27 28 MTF 29 30 44 45 IDS 22 2 29 44 10 a client limit order 22 2 systematic internalisers 27 EU 18 11 tied agents 1 2 19 10 MiFID 21 10 EU 250 11 EU 184 6
22 EU 23 1 2 ISD MiFID 24 1 eligible counterparties 19 21 22 1 credit institutions UCITS 2 on a general form on a trade-by-trade base 2 3 MiFID Investment advice MTF Operation of Multilateral Facilities A Investment service and financial analysis Ancillary services B C (5)(6)(7) C(8) 7
12 4 1 6 Dealing on own account 27 1 4 1 11 Professional client 12 Retail client 34 central counterparty 35 MiFID MiFID ITC 2000 3 6 Baron Alexandre Lamfalussy EU 2001 2 134 EU 1 2 2 1 12 13 FINAL REPORT OF THE COMMITTEE OF WISE MEN ON THE REGURATION OF EUROPEAN SECURITIES MARKETSBrussels, 15 February 2001. 8
comitology 2 European Securities CommitteeESC European Securities Regulators CommitteeCESR 1 ESC CESR CESR CESR ESC ESC 3 14 3 1 2 EU CESR EU 4 EU MiFID 1 MiFID ESC 2 MiFID MiFID 64 2 MiFID 73 23 42 13 10 14 4MTF 18 3 (a) (b) 14 9
19 10 (a) (b) (c) 21 6 (a) (b) (c) 22 3 (a) (b) 24 5 (a) (b) (c) quantitative thresholds 25 7 27 7 28 3 29 3MTF 30 3MTF 40 6 44 3 10
11 45 3 56 5 MiFID 15 MiFID 16 (a) MiFID 2 MiFID fiduciary duties suitable appropriate MiFID inducements MiFID sophistication 3 3 retail investors professional investors eligible counterparties (b) 28 15 EU MEMO/06/576/02/2006 16 MiFID 3
12 3 MiFID 24 50 (c) 30 31 33 3 27 29 8 (d) suitability appropriateness MiFID MiFID MiFID 19 1
13 37 36 2 unsuitable recommendation MiFID 19 1 MiFID 19 6 execution-only non-complex 39 (e) (f) client s order flow 47 3 66 (g) inducement 26 (a)
14 function 6 6 2 8 12 1 collective investment undertakings 12 3 (b) 13 14 15 (c) the steps 22 MiFID 25 24 25
15 (a) MiFID (b) MiFID 25 3 UK (c) 12 12 technical standard (d) substantial importance MiFID 56 4 15 (a) pre-trade transparency 19 post-trade transparency 27
16 liquidity provision (b) 3 quotes 3 systematic internaliser liquid MiFID 27 29 31 (a) MiFID MiFID MiFID 13 6 6 7 23 51 3 5 51 1 (b) MiFID 19 8 40 1
MiFID 19 8 3 41 42 40 43 (a) generic advice MiFID 52 MiFID MiFID EU MiFID EU MiFID EU MEMO/06/57 17 best possible result best possible most favorable result MiFID 19 1 MiFID 21 17 MiFID 1 4 2 5 17
18 MiFID MiFID MiFID 21 1 MiFID 21 2 MTF MiFID 21 3 MiFID a b 46
19 MiFID off-the-shell best execution package providers steps 45
MiFID 21 3 MiFID 19 8 FSA FSA FSA EU MiFID 2006 3 MiFID DP MiFID unified European requirement MiFID FSA UK FSA 154CP154 2002 10 CP154 UK MiFID UK MiFID 21 FSA MiFID 21 MiFID 20
21 3 FSA Execution Policy and Arrangement Dealer Markets Review and Monitoring 3 MiFID FSA CP154 best execution requirements market fragmentation execution venues MiFID concentration rules MiFID CP154 21 21 challenges
22 CESR 2005 1 1 1,2,3 2 1
23 A A A,, A MiFID rink nature MiFID collective investment scheme
24 MiFID 21 A process approach MiFID 21 best possible result 21 (a) The execution arrangement and execution policy 21 21 the basis MTF 21 1 (b) Relevant factors 21 1 21
25 21 in a block the indicated size
26 Likelihood of execution nature the particular characteristics stock loans (c) The relative importance of the factors MiFID (d) MiFID MiFID
27 MiFID the principal pool of liquidity (e) 21 21 MiFID MiFID proprietary trading proprietary position 21 (f) Client instructions MiFID 21 specific client instructions 21 (g) Information to clients 21 appropriate information
nature quality 21 21 UCITS UCITSUndertakings for Collective Investment in Transferable SecuritiesUCITS collective investment undertakings; CIU MiFID UCITS UCITS MiFID UCITSUCITS MiFID UCITS 19 21 22 1 19 1 UCITS UCITS FSA 21 OTC OTC MiFID protections 28
29 MiFID reference price MiFID MiFID eligible counterparties MiFID FSA MiFID FSA intermediate customers MiFID MiFID COB requirements MiFID COB COB COB MiFID spread betting company MiFID
30 MiFID UK intermediate customers MiFID MiFID Implementation challenges and options for dealers MiFID MiFID OTC 24 MTF 21 a request-for-quote basis 21 MiFID misalignment MiFID
31 at the keenest price MiFID 18 the best visible bid and offer an external price IBM UK a benchmark reference price x 21 FSA MiFID 18
32 2 2 MiFID 21 4 1 46 1 a material change driver 21
33 MiFID effectiveness DP154 coverage
34 outliers 21 MTF
35 MTF MTF broker voting systems MiFID MTF MiFID MiFID MTFEEA OTC MiFID EEA liquid shares firm bit and offer quotes up to certain size thresholds a binding price for trades MiFID EEA MTF EEA
36 MiFID reporting channels integrity MiFID 21 5 21 5 5 5? 2004 4 MiFID 2006 4 30 MiFID MiFID transposition
EU 2006 4 MiFID 19 2007 11 1 MiFID 2007 11 1 EU 2006 6 11 MiFID EU 19 DIRECTIVE 2006/31/EC OF THE EUROPEAN PARLIAMENT AND FO THE COUNCIL of 5 April 2006, amending directive 2004/39/EC on markets in financial instrument, as regards certain deadlines 37
38 1 IDS
39
2004/39/ECMiFID 1 Scope 2 Exemptions 3 Optional exemptions 4 Definitions 5 Requirement for authorisation 6 Scope of authorisation 7 Procedures for granting and refusing requests for authorisation 8 Withdrawal of authorisation 9 Persons who effectively direct the business 10 Shareholders and members with qualifying holdings 11 Membership of an authorized Investor Compensation Scheme 12 Initial capital endowment 13 Organisational requirements 14MTF Trading process and finalization of transactions in an MTF 15 Relations with third countries 1 General provisions 16 Regular review of conditions for initial authorisation 17 General obligation in respect of on-going supervision 18 Conflicts of interest 2 Provisions to ensure investor protection 19 Conduct of business obligations when providing investment services to clients 20 Provision of services through the 40
medium of another investment firm 21 Obligation to excute orders on terms most favourable to the client 22 Client order handling rules 23 Obligations of investment firms when appointing tied agents 24 Transactions executed with eligible counterparties 3 Market transparency and integrity 25 Obligation to uphold integrity of markets, report transactions and maintain records 26MTF Monitoring of compliance with the rule of the MTF and with other legal obligations 27 Obligation for investment firms to make public firm quotes 28 Post-trade disclosure by investment firms 29MTF Pre-trade transparency requirements for MTF 30MTF Post-trade transparency requirements for MTF 31 Freedom to provide investment services and activities 32 Establishment of a branch 33 Access to regulated markets 34 Access to central counterparty, clearing and settlement facilities and right to designate settlement system 35MTF Provisions regarding central counterparty, clearing and settlement arrangements in respect of MTF 36 Authorisation and applicable law 37 Requirement for the management of the regulated market 38 Requirements relating to persons exercising significant influence over the management of the regulate 41
market 39 Organisational requirements 40 Admission of financial instruments to trading 41 Suspension and removal of instruments from trading 42 Access to the regulated market 43 Monitoring of compliance with the rules of the regulated market and with other legal obligations 44 Pre-trade transparency requirements for regulated markets 45 Post-trade transparency requirements for regulated markets 46 Provisions regarding central counterparty and clearing and settlement arrangements 47 List of regulated markets 48 Designation of competent authorities 49 Cooperation between authorities in athe same Member State 50 Powers to be made available to competent authorities 51 Administrative sanctions 52 Right of appeal 53 Extra-judicial mechanism for investors complaints 54Professional secrecy 55 Relations with auditors 56 Obligation to cooperate 57 Cooperation in supervisory activities, on-the-spot verifications or in investigations 58 Exchange of information 59 Refusal to cooperate 42
60Inter-authority consultation prior to authorisation 61Powers for host Member States 62 Precautionary measures to be taken by host Member States 63 Exchange of information with third countries 64 Committee procedure 65Reports and review 66 85/611/EEC Amendment of Directive85/611/EEC 67 93/6/EEC Amendment of Directive93/6/EEC 68 2000/12/EC Amendment of Directive2000/12/EC 69 93/22/EEC Repeal of Directive93/22/EEC 70 Transposition 71 Transitional provisions 72Entry into force 73 Addressees RIST OF SERVICES ANDACTIVITIES AND FINANCIAL INSTRUMENTS PROFESSIONAL CLIENTS FOR THE PURPOSEOF THIS DIRECTIVE 43
MiFID 2 Scope and definitions 1 Subject-matter and scope 2 Definitions 3 Provision of information in a durable medium 4 Additional requirements on investment firms in certain cases Organisational requirements 1 ORGANISATION 5 2004/39/EC 13 2 8 General organizational requirement 6 2004/39/EC 13 2 Compliance 7 2004/39/EC 13 5 2 Risk management 8 2004/39/EC 13 5 2 Internal audit 9 2004/39/EC 13 2 Responsibility of senior management 10 2004/39/EC 13 2 Complaints handling 11 2004/39/EC 13 2 Meaning of personal transaction 12 2004/39/EC 13 2 Personal transactions 2 OUTSOURCING 13 2004/39/EC 13 2 1 Meaning of critical and important operational functions 14 2004/39/EC 13 5 1 (Conditions for outsourcing critical or important operational functions or investment services or activities) 15 2004/39/EC 13 5 1 Service providers located in third countries 44
3 SAFEGUARDING OF CLIENT ASSETS 16 2004/39/EC13 7 8 (Safeguarding of client financial instruments and funds) 17 2004/39/EC 13 7 Depositing client financial instruments 18 2004/39/EC 13 8 Depositing client funds 19 2004/39/EC 13 8 (Use of client financial instruments) 20 2004/39/EC 13 7 8 Reports by external auditors 4 CONFLICTS OF INTEREST 21 2004/39/EC 13 3 18 (1) (Conflicts of interest potentially detrimental to a client) 22 2004/39/EC 13 3 18 (1) (Conflicts of interest policy) 23 2004/39/EC 13 6 (Record of services or activities giving rise to detrimental conflict of interest) 24 2004/39/EC 19 2 (Investment research) 25 2004/39/EC 13 3 (Additional organizational requirements where a firm produces and disseminates investment research) Operating conditions for investment firms 1 INDUCEMENT 26 2004/39/EC 19 1 Inducements 2 INFORMATION TO CLIENTS AND POTENTIAL CLIENTS 27 2004/39/EC 19 2 Conditions with which information must comply in order to be fair, clear and not misleading 45
28 2004/39/EC 19 3 (Information concerning client classification) 29 2004/39/EC 19 3 (General requirement for information to client) 30 2004/39/EC 19 3 1 (Information about the investment firm and its services for retail clients and potential retail clients) 31 2004/39/EC 19 3 2 (Information about financial instruments) 32 2004/39/EC 19 3 2 (Information requirements concerning safeguarding of client financial instruments or client funds) 33 2004/39/EC 19 3 4 (Information about costs and associated charges) 34 2004/39/EC 19 2 19 3 4 85/611/EEC (Information drawn up in accordance with Directive85/611/EEC) 35 2004/39/EC 19 2 3 2003/71/EC (Information drawn up in accordance with Directive2003/71/EC) 3 ASSESSMENT OF SUITABILITY AND APPROPRIATENESS 36 2004/39/EC 19 4 (Assessment of stability) 37 2004/39/EC 19 5 (Assessment of appropriateness) 38 2004/39/EC 19 4 5 (Provisions common to the assessment of suitability or appropriateness) 39 2004/39/EC 19 6 (Provision of services in non-complex instruments) 4 REPORTING TO CLIENTS 40 2004/39/EC 19 8 46
(Reporting obligations in respect of execution of orders other than for portfolio management) 41 2004/39/EC 19 8 (Reporting obligations in respect of portfolio management) 42 2004/39/EC 19 8 (Additional reporting obligations for portfolio management or contingent liability transactions) 43 2004/39/EC 19 8 (Statement of client financial instruments or client funds) 5 BEST EXECUTION 44 2004/39/EC 19 1 21 1 (Best execution criteria) 45 2004/39/EC 19 1 (Best execution: application to portfolio management and reception and transmission of orders) 46 2004/39/EC 21 3 4 (Execution policy) 6 CLIENT ORDER HANDLING 47 2004/39/EC 22 1 (General principles) 48 2004/39/EC 22 1 (Aggregation and allocation of orders) 49( 2004/39/EC 22 1 ) (Aggregation and allocation of transactions for own account) 7 ELIGIBLE COUNTERPARTIES 50( 2004/39/EC 24 3 ) (Eligible counterparties) 8 RECORD KEEPING 51 2004/39/EC 13 6 (Retention of records) 9 200439/EC DEFINED TERMS FOR THE PURPOSES OF DIRECTIVE 2004/39/EC 47
52 2004/39/EC 4 1 4 (Investment advice) 4 Final provisions 53(Transposition) 54 (Entry in force) 55(Adressees) 48
49 MiFID 1 Recital 33 contractual obligations agency obligations 19 Conduct of business obligations 2 8
50 5 UCITS non-complex Title 18 2 legal text 19 1 8 64 2
51 a b c 21 nature 1 arrangement Multilateral Trading FacilityMTF MTF
52 24 19 20 21 1 eligible counterparties UCITS 2 1 (k) (l) undertakings 1 19 21 22 entities quantitative thresholds proportionate requirement other undertakings prospective counterparties 1 undertakings 2 entities 3 undertakings 3
2 3 4 64 2 a2 b3 c3 undertakings quantitative thresholds proportionate requirement 53
54 5 MiFID 2 Recitals 56 2004/39/EC 21 2 21 1 57 parts aspects 58 200439EC 59 best possible result OTC 60
55 speed likelihood settlement size nature 61 62 200439 21 4 63 duplication 64 200439 availability comparability consolidation
2008 11 1 5 44 2004/39/EC 19 1 21 1 criteria 2004/39/EC 21 1 (a) (b) nature (c) characteristics (d) 46 execution venue regulated marketmtf systematic internaliser liquidity provider 21 1 2008 10 30 45 2004/39/EC 19 1 2004/39/EC 21 22 1 56
57 2004/39/EC 21 22 1 46 2004/39/EC 21 3 4 2004/39/EC 21 2 a 44 1 2004/39/EC 211 b