MiFID – the Markets in Financial Instruments Directive – came into effect on 1 November 2007, replacing the Investment Services Directive (ISD). MiFID extends the coverage of the ISD and introduces new and more extensive requirements that firms will have to adapt to, in particular for their conduct of business and internal organisation.

As regards Markets and Exchanges, MiFID's core objective is to achieve greater competition by eliminating the old "concentration rules" - previous national rules that gave national official exchanges a monopoly on securities trading. Further, the aim is that on-exchange and off-exchange activities be regulated similarly, with equivalent transparency. Therefore, MiFID creates a detailed regulatory regime governing the organised execution of transactions not just on exchanges but also in other trading systems and by investment firms themselves.

MiFID defines and regulates three types of execution venue:

• Regulated Markets (RMs)

• Multilateral Trading Facilities (MTFs) - alternative or automated trading systems and certain electronic communication networks

• Systematic Internalisers (SI) - regulated investment firms which "on an organised, frequent and systemic basis" deal on their own account by executing client orders outside RMs or MTFs.

Regulated Markets

The list of Regulated Markets can be found by clicking here within our site, at the European Commission's website or on the CESR MiFID Website.

MiFID defines Regulated Markets and prescribes minimum requirements that a market must meet before given authorisation as a regulated market. Article 4, paragraph 1, point 14 of Directive 2004/39/EC defines a ‘regulated market’ as a multilateral system operated and/or managed by a market operator, which brings together or facilitates the bringing together of multiple third-party buying and selling interests in financial instruments — in the system and in accordance with its non-discretionary rules — in a way that results in a contract, in respect of the financial instruments admitted to trading under its rules and/or systems, and which is authorized and functions regularly and in accordance with the provisions of Title III of Directive 2004/39/EC.

Article 47 of the Markets in Financial Instruments Directive (Directive 2004/39/EC, OJ L 145, 30.4.2004) authorises each Member State to confer the status of ‘regulated market’ on those markets constituted on its territory and which comply with its regulations. Article 47 also requires that each Member State maintains an updated list of regulated markets authorised by it and requires the Commission to publish a list of regulated markets, notified to it, on a yearly basis in the Official Journal of the European Union.

Transparency

MiFID prescribes minimum standards for pre-trade transparency on Regulates Markets and MTFs, distinguishing order-matching and quote-driven systems and post-trade transparency requirements previously applicable to Regulated Markets are extended to MTFs. Post-trade transaction reporting requirements apply to trades in all intruments admitted to trading in a Regulated Market, even if the trade is executed off-exchange.

Passporting

Passporting is key to MiFID too. MifID  does this in two ways:

• Member States must allow foreign broker-dealers to become members in or access domestic Regulated Markets

• Member States must allow Regulated Markets from other Member States to provide appropriate arrangements to facilitate access to and trading on their markets by remote members or participants established there.