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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…

1832

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

Keywords

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.

2476

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

Keywords

Book part
Publication date: 24 August 2021

Athanasios Panagopoulos

This chapter aims the research whether the application of European Directive, Markets in Financial Instruments Directive (MiFID), had any significant effects on the European…

Abstract

This chapter aims the research whether the application of European Directive, Markets in Financial Instruments Directive (MiFID), had any significant effects on the European Capital Markets and the progress of the European Integration. This new regulation specifies the tasks and responsibilities of the supervisory authorities of the Member State of origin and the host Member State, in order to enhance the certainty of effectiveness of cross-border transactions supervision and to reduce the risk of imposing unnecessary legal reforms from the host Member State on investment firms which perform cross-border transactions. It has been concluded, among others, that the aligning of the national regulatory approaches to a common European regulatory system is quite necessary. It is finally concluded that MiFID will contribute to reduce problems at country level as the previous experience of the Investment Services Directive, where the European investments and economies of Member States were based mainly on the level of ‘country’ and not of the ‘sector’. An effective capital entrepreneurship market is a strategically important element in the development of new and innovative businesses, encouraging entrepreneurship, increasing the productivity and maintaining high economic growth rates in Europe. Currently, European venture capital market is much less effective than that of the US market, for example. Therefore, in this area, should be specified the priorities that will lead to new initiatives.

Details

Entrepreneurship, Institutional Framework and Support Mechanisms in the EU
Type: Book
ISBN: 978-1-83909-982-3

Keywords

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

Keywords

Open Access
Article
Publication date: 11 April 2022

Tom Loonen and Ronald Janssen

With the introduction of the Markets in Financial Instruments Directive (MiFID), financial institutions are faced with many investor protection provisions; this has a major impact…

1883

Abstract

Purpose

With the introduction of the Markets in Financial Instruments Directive (MiFID), financial institutions are faced with many investor protection provisions; this has a major impact on the day-to-day operations of private banks, which provide investment services to predominately retail or non-professional investors. The purpose of this paper is to determine how MiFID provisions regarding investor protection with respect to suitability are complied with in practice by private banks.

Design/methodology/approach

Based on interviews with 25 representatives of private banks from 10 different European Union (EU) member states, the researchers have determined how these provisions are fulfilled and associated risks mitigated. Mapping out the suitability requirements of MiFID and comparing them with how these have been operationalised, we arrive at the question of whether this leads to a level playing field and investor protection by different private banks.

Findings

Although MiFID is trying to achieve a level playing field between the EU member states, this study shows that this has not been achieved in all areas. Investor protection requirements from MiFID are interpreted and operationalised differently. Although these differences are sometimes small, sometimes they are larger and affect the way the investor is served and suitability determined.

Originality/value

This research provides a unique insight into the way private banks in Europe have implemented the MiFID II requirements and gives insight into best practices. For the future, this research can serve as a prelude to in-depth follow-up research on the implementation of EU provisions.

Details

Journal of Financial Regulation and Compliance, vol. 31 no. 1
Type: Research Article
ISSN: 1358-1988

Keywords

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 Directive II…

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

Keywords

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. The…

1531

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

Keywords

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 national…

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

Keywords

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

Keywords

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.

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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

Keywords

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