The European Union (EU) has recently assumed a much stronger role in overseeing and controlling securities and derivative transactions to counter an unwanted growth in commodity speculation and “dark markets” in recent years. The EU’s goal is to establish a safer and more transparent financial system by enhancing regulatory requirements, market transparency and investor protection.
The Markets in Financial Instruments Regulation (MiFIR), issued by the EU Commission in 2011, requires financial institutions to migrate from current Markets in Financial Instruments Directive (MiFID) 1 reporting requirements to the stricter, more comprehensive MiFIR rules by end of year 2015.
MiFIR’s Far-Reaching Impact on EU Financial Institutions
MiFIR’s scope extends beyond the European securities markets and investment companies to commodity firms, data providers and third-party country firms. It also significantly expands both the range of required reporting and the type of data required, for example:
- All derivative trading on regulated markets must be reported, including the previously exempted interest rate, commodity, over the counter (OTC) and foreign exchange (FX) derivatives.
- All instruments traded on Multilateral Trading Facilities (MTFs) and Organized Trading Facilities (OTFs) must be reported, which significantly increases the number of cash instruments involved.
- Any instrument that could have an impact on the value of instruments trading on a trading venue must be reported.
- The reports must include the names of individual traders executing the transaction or the algorithm used, and whether the trader is short selling.
