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Article
Publication date: 11 May 2015

Lukasz Prorokowski

This paper aims to discuss the impact of nascent Markets in Financial Instruments Directive (MiFID II) initiatives and, thus, to deliver practical insights into MiFID II…

Abstract

Purpose

This paper aims to discuss the impact of nascent Markets in Financial Instruments Directive (MiFID II) initiatives and, thus, to deliver practical insights into MiFID II implementation, compliance and cost reduction MiFID II constitutes the backbone for the upcoming financial market reforms. With the first proposal of MiFID drafted in October 2011, this regulatory framework has undergone over 2,000 amendments. As MiFID II currently stands, this Directive attempts to address issues exposed by the global financial crisis.

Design/methodology/approach

This study, based on secondary research and an in-depth analysis of the MiFID II framework, investigates structural and technological challenges entailed by this Directive. The analysis is broken down into the following sections: technological and structural challenges; costs of implementation; MiFID II teams; facilitating near real-time regulatory reporting; increased transparency requirements; and information technology (IT) initiatives for MiFID II compliance.

Findings

MiFID II commands significant changes in business and operating models. With this in mind, the study indicates current technological and structural challenges faced by financial institutions and advises on ways of mitigating MiFID II risks. Although it is too early to assess the costs of implementing MiFID II, this paper suggests ways of reducing MiFID II-related costs. The study also advises on organising dedicated teams to deal with MiFID II. Furthermore, this paper argues that early investments in IT systems and processes would allow financial services firms to gain a competitive advantage and, hence, scoop up market share or launch new, lucrative services – especially in the area of collateralisation and market data processing.

Originality/value

This paper shows that the current version of MiFID II still requires a great deal of attention from the regulators that need to readdress contentious issues revolving around the links between MiFID II and other regulatory frameworks such as European Market Infrastructure Regulation and Dodd–Frank. This study addresses the MiFID II compliance issues by adopting European Union and non-European Union banks’ and asset managers’ perspectives and, hence, delivers practical implications for risk managers and compliance officers of various financial institutions.

Details

Journal of Financial Regulation and Compliance, vol. 23 no. 2
Type: Research Article
ISSN: 1358-1988

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Article
Publication date: 27 February 2007

Stéphane Janin

The aim of this paper is to analyze the impact of the Markets in Financial Instruments Directive (MiFID) on investment managers but also on funds' units as financial instruments.

Abstract

Purpose

The aim of this paper is to analyze the impact of the Markets in Financial Instruments Directive (MiFID) on investment managers but also on funds' units as financial instruments.

Design/methodology/approach

Starting from the innovative legislative structure and scope of the MiFID, the paper assesses the way investment managers and funds'units are impacted, knowing that investment managers and funds'units are already largely tackled by another Directive, the UCITS Directive.

Findings

In spite of increasing many organizational and process requirements within investment management companies, the MiFID will probably not create dramatic changes in the daily functioning of those companies. However, the linkage between the provisions of the MiFID and the UCITS Directive has not been clearly made by European legislative institutions, which leaves uncertainties in the way the national legislators and regulators will transpose the MiFID in order to get the best consistence between this Directive and the UCITS one.

Research limitations/implications

Final assessment should be made once Member States have transposed the MiFID Directive and have enforced it in practice.

Originality/value

The value of the paper is to set a bridge between two different directives (the MiFID on the one hand, the UCITS Directive on the other hand) which both impact investment managers and funds' units.

Details

Journal of Financial Regulation and Compliance, vol. 15 no. 1
Type: Research Article
ISSN: 1358-1988

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Article
Publication date: 18 December 2020

Tom Loonen

The Markets in Financial Instruments Directive (MiFID) II directive was enforced in the EU in January 2018. While EU-member states implemented this directive in their…

Abstract

Purpose

The Markets in Financial Instruments Directive (MiFID) II directive was enforced in the EU in January 2018. While EU-member states implemented this directive in their national legislation, investment firms are still enforcing compliance. With the purpose of “investor protection”, the purpose of this study is to investigate the effectiveness of transparency, suitability, warning and information requirements. How do investment advisers view and embrace these MiFID II requirements? Are differences evident within this group of professionals?

Design/methodology/approach

In total, 267 Dutch investment advisors serving non-professional investors daily completed structured surveys on their opinion of the acceptance and effectiveness of the MiFID II requirements. The findings are compared with existing literature to examine similarities with other legislation.

Findings

The results demonstrated differences depending on the investment firms’ size and investment advisors’ seniority and gender. Professionals should be critical of new legislation and regulations, as it limits their autonomy. However, female investment advisors and those with up to ten years’ experience are less critical of the effectiveness of the MiFID II requirements, embracing them without discussion. Investment advisors in large investment firms believe that MiFID II contributes to investors’ interests, whereas those in small and medium-sized investment firms often do not share this opinion. For example, respondents considered cost transparency an effective requirement to achieve better investment services and protect investors’ interests.

Originality/value

The effectiveness and applicability of legislation are often viewed from a legal perspective, and enforcement is essential. However, this study explores legislation from the perspective of professionals under supervision.

Details

Journal of Financial Regulation and Compliance, vol. 29 no. 2
Type: Research Article
ISSN: 1358-1988

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Article
Publication date: 13 November 2019

Maik Huettinger and Agnė Krašauskaitė

The purpose of this paper is to assess the impact of the markets in financial instruments directive II (MiFID II) on investment services in the Baltic states.

Abstract

Purpose

The purpose of this paper is to assess the impact of the markets in financial instruments directive II (MiFID II) on investment services in the Baltic states.

Design/methodology/approach

The authors take an exploratory, qualitative approach, based on data conducted from interviews with nine investment industry professionals using the laddering technique. The pool of experts was selected using the purposeful sampling method, and experts must have had a minimum of five years investment experience in the Baltics, working familiarity with MiFID II, and a university education in the fields of finance or economics.

Findings

The strict requirements of MiFID II reduce the range of available investment products and services for customers in the Baltics. Also, the profitability of Baltic investment companies decreased due to high compliance costs and bans on inducements. The results indicate that this may lead to increased barriers to entry and mergers and acquisitions for small investment companies.

Originality/value

To the best of the authors’ knowledge, this is the first attempt to research the implications of MiFID II implementation in the Baltic states. The qualitative approach chosen offers a unique opportunity to highlight the critical effects of MiFID II on financial intermediates in smaller geographical markets.

Details

Qualitative Research in Financial Markets, vol. 12 no. 3
Type: Research Article
ISSN: 1755-4179

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Article
Publication date: 2 May 2019

Tom Loonen and Randy Pattiselanno

This paper aims to identify the duty of care that applies to ‘professionally classified clients’ based on the recently implemented Markets in Financial Instruments…

Abstract

Purpose

This paper aims to identify the duty of care that applies to ‘professionally classified clients’ based on the recently implemented Markets in Financial Instruments Directive II (MiFID II) as well as the previous Markets in Financial Instruments Directive I (MiFID I). The authors place critical notes on the effectiveness of some MiFID provisions.

Design/methodology/approach

The authors have reviewed the Delegated Acts of MiFID I and II, as well as Q&A’s of the European Regulator, ESMA and jurisprudence. The authors aim to add value by facilitating a discussion on the effectiveness of applicable MiFID provisions.

Findings

This review of the legal provisions provides researchers and practitioners in the investment sectors with a clear overview of the legal provisions detailing how these provisions should be met and how improvements to the provisions can be achieved.

Practical implications

This paper specifies what the provisions for professional classified clients are and facilitates a discussion on the effectiveness of these provisions.

Originality/value

Addressing the legal provisions which are applicable to ‘professional classified clients’ that derive from MiFID I and II and includes a critical analysis which offers an original perspective.

Details

Journal of Financial Regulation and Compliance, vol. 28 no. 1
Type: Research Article
ISSN: 1358-1988

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Article
Publication date: 10 January 2019

Peter Yeoh

This paper aims to discuss key concerns surrounding the recent implementation of the Markets in Financial Instruments Directive (MIFID II). It focuses on the UK regime…

Abstract

Purpose

This paper aims to discuss key concerns surrounding the recent implementation of the Markets in Financial Instruments Directive (MIFID II). It focuses on the UK regime. The insights derived are envisaged to be helpful guides for participants and regulators in financial markets.

Design/methodology/approach

This paper used the legal-economics perspective. It relied on primary data from statutes and regulations and secondary data from the public domain to analyze the phenomenon. The analytical framework comprised the following sections: Introduction, MiFID I review, MiFID II scope, MiFID II key concerns and concluding remarks.

Findings

Only half of the EU Member States including the UK managed to transpose MiFID II within the 3rd January 2018 effective date. At this early stage of implementation, various teething problems were encountered. These pertained to costs and charges reporting, firm governance, product governance, transaction reporting, best execution and research. Owing to the sheer scale and complexity of MIFID II, most entities barely coped with their reporting obligations. Noting the situation, the Financial Conduct Authority assured firms taking all sufficient steps that they would be treated fairly.

Research limitations/implications

The paper was not sufficiently empirical. However, the study benefited reasonably from triangulation of data and perspectives to provide good insights on the implementation effects of the complex and voluminous EU rules for governing financial markets with global implications.

Practical implications

Investors could gain from the enhanced transparency and best execution rules. Investment banks could gain from the emerging resilient, integrated and efficient financial markets. Regulators with better access to more and higher quality reporting could intervene more effectively when required.

Originality/value

This paper assembled and critically analyzed currently available research insights in these areas so as to provide useful guidance to those needing to work and comply with MiFID II rules and academics teaching financial services law.

Details

Journal of Financial Regulation and Compliance, vol. 27 no. 1
Type: Research Article
ISSN: 1358-1988

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Book part
Publication date: 9 July 2018

Katica Tomic

Product intervention power is introduced under the markets in financial instruments regulation (MiFIR) and packaged retail and insurance-based investment products (PRIIPs…

Abstract

Product intervention power is introduced under the markets in financial instruments regulation (MiFIR) and packaged retail and insurance-based investment products (PRIIPs) Regulation for all EU Member States and gives National Competent Authorities (NCAs), European Securities and Markets Authority (ESMA), and European Banking Authority (EBA) powers to monitor financial products (and services) under their supervision and to “temporarily” prohibit or restrict the marketing, distribution, or sale of certain financial instruments, or to intervene in relation to certain financial activities or practice. This extends the supervisory measures defined in MiFID II to any PRIIPs (including insurance-based investment products “IBI products”) that would not otherwise fall under the scope of MiFID II. Product intervention power is given to the NCAs, and in order to use power, it requires to take the specifics of the individual case into account and a series of conditions, criteria, and factors to fulfill. Moreover, ESMA and the EBA have a type of control function and ability to override national regulators on product. The aim of product intervention powers is to ensure strengthening of investor protection, but given the potential significant impact of this power, calls into question of possibility to delay innovation and slow down product developments on the capital market.

This paper provided an overview of supervisory measures on product intervention, that is, scope of the product intervention power, criteria, factors, and risks which have to be taken into consideration when using this regulator’s tool.

Details

Governance and Regulations’ Contemporary Issues
Type: Book
ISBN: 978-1-78743-815-6

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Article
Publication date: 22 February 2008

Begoña Torre Olmo, Sergio Sanfilippo Azofra and Carlos López Gutiérrez

The objective of this paper is to review Spanish regulatory evolution in the collective investment area, which is very recent in its principal aspects.

Abstract

Purpose

The objective of this paper is to review Spanish regulatory evolution in the collective investment area, which is very recent in its principal aspects.

Design/methodology/approach

The paper assesses the way investment funds are impacted by the Markets in Financial Instruments Directive (MiFID) and the Spanish legislation.

Findings

The legal aspect of the Collective investment institutions (CII) in Spain has experienced a major renovation over the past four years. There were three basic principles: increased flexibility of the CIIs' regime, reinforced protection for investors, and improved administrative intervention regime. Although MiFID focuses its attention on financial markets and investment firms, it also implies an important change for collective investment institutions. New conditions arising after the introduction of this norm are imposing major challenges for financial entities, supervisory authorities and financial markets.

Research limitations/implications

The unified regulatory system, even after the implementation of MiFID, remains fragmented, and the way in which it will apply to investment funds is not easy to disentangle.

Practical implications

As a result of this process, it is hoped that levels of competitiveness will increase and transaction costs fall, which will ultimately result in improved conditions for investors and more efficient companies.

Originality/value

The paper establishes the implications of the MiFID and the UCITS Directives for the investment fund industry in Spain.

Details

Journal of Financial Regulation and Compliance, vol. 16 no. 1
Type: Research Article
ISSN: 1358-1988

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Article
Publication date: 27 July 2010

Giovanni Petrella

The purpose of this paper is to evaluate how markets in financial instruments directive (MiFID) and regulation national market system (Reg NMS) affect the competition for…

Abstract

Purpose

The purpose of this paper is to evaluate how markets in financial instruments directive (MiFID) and regulation national market system (Reg NMS) affect the competition for order flow among trading venues in, respectively, Europe and the USA.

Design/methodology/approach

The paper examines the differences between MiFID and Reg NMS and provides, based on market microstructure principles, insights as to their likely impact on European and the US securities markets.

Findings

Although MiFID and Reg NMS share the common objective of enhancing competition in securities markets, they adopt different provisions with respect to three issues that strongly influence the competition for order flow among trading venues. Specifically, some of the provisions set forth by the US regulation with respect to the best execution duty, the consolidation of market data and the disclosure of execution quality information appear to be more effective, compared to the European Union ones, in strengthening competition for order flow among trading venues.

Research limitations/implications

Regulatory factors can only partly explain the current structure of the European and US securities markets. Technology and heterogeneity in traders' demand are other important factors that concur in shaping the European and US markets.

Practical implications

The degree of competition for order flow among trading venues depends on how regulations define the best execution duty, the availability of updated and consolidated pre‐trade (i.e. quotations) and post‐trade (i.e. transactions) information and the efficiency of post‐trading infrastructures.

Originality/value

The paper addresses issues not yet investigated and provides valuable insights for financial intermediaries, incumbent and prospective exchanges as to the competition in the securities industry, and to regulators as to the likely impact of the new regulations.

Details

Journal of Financial Regulation and Compliance, vol. 18 no. 3
Type: Research Article
ISSN: 1358-1988

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Article
Publication date: 1 July 2005

Aman Jairath

To introduce the Market in Financial Instruments Directive (MiFID).

Abstract

Purpose

To introduce the Market in Financial Instruments Directive (MiFID).

Design/methodology/approach

Provides a brief overview of the MiFID, how it widens the scope of business permitted under the “passport” regime, the types of financial institutions it covers, and the time frame for implementation.

Findings

The biggest challenge facing regulated firms is the limited time they will have to comply with MiFID's requirements.

Originality/value

Discusses the scope and importance of MiFID.

Details

Journal of Investment Compliance, vol. 6 no. 3
Type: Research Article
ISSN: 1528-5812

Keywords

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