OVERVIEW

The Markets in Financial Instruments Directive II (MiFID II) has applied since January 2018 and was the largest overhaul of financial services regulation in a decade. MiFID II impacts the entire investments lifecycle and enhanced and expanded regulation of financial institutions, their services and activities within the European Economic Area (EEA). This includes investment firms, trading venues, data reporting service providers and third country firms providing investment services or performing investment activities into the EU. MiFID II requirements govern many areas of BNY Pershing and its clients' business.

MIFID II/MIFIR REVIEWS

MIFIR/MiFID was implemented over five years ago and as expected it is subject to a number of post implementation reviews and proposed changes.

For firms operating in the EU and UK, regulatory change planning has become more difficult with divergence across new and changes to existing regulation - the review of MiFID II being a prime example.

EU MiFID

In the EU, legislative amendments to MiFID II have been published and must be implemented by member states by 29 September 2025. The amendments are significant, covering changes to pre and post trade transparency, the emergence of a consolidated tape, the deletion of the best execution reports (which had already been temporarily suspended) and the treatment of payment for order flow (PFOF).

These changes are technical in nature and mainly impact trading firms and trading venues.

UK MIFID

The UK is also proposing major reforms to the MiFID II regime. It has started to make changes as a result of the Wholesale Markets Review and also the Investment Research Review, where the proposals include ”rebundling” costs for research and execution.

It is also proposing changes to the transparency framework for the bond and derivative markets in the UK which will involve the FCA working with the Treasury to ensure aspects of the transparency regime are transferred into the FCA's Market Conduct Sourcebook. The FCA has also started work on the framework for the UK’s consolidated tape, starting with introduction of a single bond consolidated tape in 2025 with equity to follow.

FCA and the HM Treasury's publications to the on-shored UK MiFID II regime are focused on what is best for the UK market and the changes announced are largely good news and should result in the removal of various regulatory burdens for firms. The focus is to make the City of London more competitive as a global trading stage and shift liquidity from the EU to UK trading venues.

BNY Pershing's Comment—Linda Gibson, Director of Regulatory Change EMEA (June 2024)

The proposed changes to MiFID II will result in continuing divergence for firms operating cross-border under the MiFID regime. Understanding what the changes mean for your firm is critical.

The EU and UK started at the same place having implemented MiFID II in January 2018, however both the EU and UK have already made changes, the divergence of both rules and timings has started.

We now have two regulators moving in similar directions of travel but with different priorities and timelines which will have a significant impact on firms who need to be able to integrate the amendments into their wider business strategy and continue to adapt as further amendments are drip fed through.

Clearly tracking and interpreting all things MIFID II is more complicated for both EU and UK firms going forward especially around pre and post trade transparency, market data and market access.