A Short Guide to Understanding MiFIR
In 2011, the European Commission (EC) published two proposals: one entitled ‘Markets in Financial Investments Regulation’ (MiFIR), alongside a revised version of the Markets in Financial Instruments Directive (MiFID II).
The EU’s main aim with MiFIR is to establish a more transparent and safer financial system by enhancing regulatory requirements, investor protection and ultimately market transparency. The legislation details further reporting requirements regarding the disclosure of trade data to the public and relevant authorities.
MiFIR reporting obligations will come into force by mid-2015, according to the latest indications given by the European Commission. This will leave firms with sufficient time to adapt to new procedures and practices.
Who will be affected?
The proposal will specifically affect investment firms, as well influencing the structure of the European securities market. Alongside the simultaneous MiFID update, it will also likely have an impact upon other firms such as some data providers, third party country firms and commodity firms.
How is MiFIR different to MiFID
Firms will be required to report all derivatives traded on regulated markets, so commodities, FX derivatives and interest rates will all come under this requirement where they had not previously.
Instruments traded on Organised Trading Facilities (OTFs) and Multilateral Trading Facilities (MTFs) will also need to be reported, as will any instrument that could potentially affect the value of a trading venue’s instruments.
The actual fields that make up a transaction report will also be increased, with additions such as an Algo or Trader identifier to detail the algorithm used or individual trader who is undertaking the transaction, and also an additional area to detail when a trader is short selling.
ESMA – the European Securities and Markets Authority – will also be putting together a common transaction reporting framework for the whole of the continent, which will likely lead to changes in the way that firms report to the relevant authorities.