09 Apr 2014 Markets in Financial Instruments Regulation (MIFIR)-change and impact
On the 20 October 2011, the European Commission published two proposals: the revised Markets in Financial Instrument Directive (“MIFID II”) along with Markets in Financial Investment Regulation (“MIFIR”). The European Union’s main intention with MIFIR is to establish a safer and more transparent financial system by enhancing regulatory requirement, market transparency and investor protection.
The MIFIR sets out requirements mainly in relation to the disclosure of trade data to the public, reporting of transactions to the competent authorities, trading of derivatives on organized venues and non-discriminatory access to clearing and non-discriminatory access to trading in benchmarks. Therefore, the MIFIR have tied together the data transparency requirements under one regulatory document, leaving the MIFID II to deal with aspects such as the provision of investment services and conduct of business requirements for investment firms.
Hence, the MIFIR focuses on developing cross-border transparency and maintaining a level playing field with regards to data reporting requirements and access. The regulation contains reporting requirements on both pre-trade data and post-trade data.
When will the MIFIR come into effect?
A formal approval of the final version of both the MIFID II and MIFIR is expected by the end of the current term of the Parliament in May/June 2014. However, it seems that the MIFIR reporting obligations will only come into force by mid-2015. This shall leave sufficient time to adapt to the new procedures and practices.
Which firms shall be affected?
The implementation of the MIFIR shall have an impact on investment firms and the structure of the European securities market. Furthermore, with the simultaneous MIFID update, firms such as data providers, third country firms and commodity firms shall also be affected.
Additional Reportable Instruments
The MIFIR shall bring a significant expansion in the range of reportable instruments;
- All derivatives admitted to trading on regulated markets will become reportable. For example, the interest rate, commodity and FX derivatives shall need to be reported.
- All instruments traded on Multilateral Trading Facilities (“MTFs”) and Organized Trading Facilities (“OTFs”) shall become reportable, significantly increasing the number of cash instruments to be reported.
- Any instrument that could have an impact on the value of instruments trading on a trading venue shall need to be reportable.
The MIFIR shall also increase the number of fields making up a transaction report. There shall be significant new additions including requirement of Trader and Algo identifier to identify the individual trader executing the transaction or the algorithm used.
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