MiFID’s Impact on American Markets

The Markets in Financial Instruments Directive, or MiFID, is a European Union Law that maintains peace and order within 30 states that are members of the European Economic Area by means of ensuring imposition of orderly policies and laws for investment services. The goal of Directive is to increase the level of competition as well as to protect the consumer in investment services. To be able to classify which businesses are covered by the union and which aren’t, MiFID characterizes between investment services and operations, or the core service, and ancillary services or non-core services.

If a business operates investment services and acts, it is subjected under Directive in respect two of these and also of ancillary services. However, if a business only operates ancillary services, it is not put under the union yet nor can it obtain the benefits that the union’s passport can offer. The Directive secures most traded financial goods with an exception to particular international exchange trades. This involves commodities and other derivatives like freight, carbon and climate derivatives.

So how can it affect the market industry of the US? Markets in Financial Instruments Directive affect several if not all firms that have been held as subjects to the ISD with an addition to firms that weren’t subjected to ISD in the past. This includes investment banks, portfolio managers, stockbrokers and broker dealers, corporate finance firms, many futures and options businesses and some commodity-related companies.

As said earlier, the Directive necessitates the Member States to organize the policies governing investment utilities and activities. To this end, the Member States should facilitate an authorization system that allows investment businesses to operate within the European Union. In simpler and more comprehensive terms, the Directive should enable investment companies, financial institutions and stock markets to provide their services outside borders based upon the authorization filed by the main authority of their native Member State. Due to the fact that authorization is subjected to the same policies and requirements that are legalized in all the Member States, it will induce harmonization of policies handling investment businesses. In this situation, the Directive is intended to level national rules supervising the provisions of investment utilities and the processes of stock exchanges, with the ultimate goal of producing a single European securities rule book.

To learn more about markets in financial instruments directive and their scope of responsibilities and effects outside the European borders, you can view various research content on the net that may serve as a more comprehensive explanation of the subject at hand.