The Markets in Financial Instruments Directive (MiFID) was a European Union Directive that was implemented in November 2007 and was updated in January 2018 as the MiFID II legislative framework across the European Union (EU).
MiFID II provides oversight to all forms of financial trade among EU member nations. MiFID II imposes reporting and testing requirements designed to increase transparency and to reduce the use of private investor exchanges and over the counter trades.
In other words it forces all trades to name the investors involved and limits the scale of “dark trading” to below 8%. MiFID II specifically regulates high-frequency trading, a system where high-performance computers placed physically close to exchanges to reduce latency were able to trade high volumes with very small incremental changes to leverage massive returns.
Where MiFID was limited in scope, MiFID II increased the types of trades to include pretty much every type of trade. MiFID II now includes all aspects of financial investment and trading as well as financial professionals with banks, trading firms, fund managers, exchange officials and brokers and anyone associated with the firms who perform these functions. Like Dodd-Frank the information about how a trade was researched now forms part of the submission that must be made for each trade undertaken.
MiFID II places on organizations and people who trade the full weight of EU financial governance, and provides EU, local country government financial organizations and financial policing organizations with the ability to review and analyze EU trades.
Like the US Dodd-Frank regulatory framework, MiFID II is a rigorous series of regulations for trading organizations to adhere to, and the process of how each organization will adhere is still evolving. As any failures to adequately meet the regulations become public and the scale of any punishments are assessed businesses will be able to assess the risk to reputation and the cost associated with compliance more carefully.
Today we see financial institutions of all sizes working hard to implement effective reporting to comply with the regulations, and this will only grow over time.
What Nastel can do to help you manage your MiFID II Compliance with both internal governance and regulatory compliance requirements.
Nastel Technologies can monitor all the systems associated with MiFID II transactions and by reading the payloads of each MiFID II transaction message can present a complete view of the pathway of each MiFID II transaction, overlaying the performance data from each system associated with the transaction to provide a visual method of analyzing each transaction and allowing for both real-time and historical reports to be generated to meet internal governance and regulatory compliance needs and to provide predictive and proactive report of any likely issues.